When you obtain a residential mortgage to purchase a home, lenders (such as CIBC) require security for the loan in the form of property, such as a house.
To provide this security, you must sign a charge document, which is then registered with the provincial or territorial land registry office where the property is located. This charge gives the lender certain rights, including the right to sell the property if you fail to repay your loan as agreed.
Lenders can register 2 types of charges: standard or collateral.
What's a standard charge?
A standard charge — also known as a traditional, conventional or non-collateral charge — is registered for the exact amount of your mortgage loan. The registered titleOpens a popup. document includes the details of your mortgage loan, such as the principal amount, interest rate, term, payment amount and more. A standard charge secures only the single mortgage loan associated with it.
For example, if you need a mortgage loan for $300,000 to buy a home, the lender registers a standard charge for $300,000. If you later want to borrow more money, you must pay off the existing mortgage loan, discharge the registered charge, sign a new mortgage loan agreement and register a new charge.
What's a collateral charge?
A collateral charge, also known as a collateral mortgage, allows you to use your home as security for one or more loans. The lender may register the charge for an amount greater than your initial loan, which enables you to borrow additional funds in the future without registering a new charge, provided the total amount borrowed does not exceed the registered principal amount.
For example, if you obtained a mortgage loan for $300,000 to buy a home, the lender may register a collateral charge for $350,000. This means you could potentially borrow an additional $50,000 later without having to register a new charge. The specific terms of your mortgage loan (such as principal, interest rate, term and payments) are outlined in a separate mortgage loan agreement and are not included in the document registered on title.
Standard charges versus collateral charges
Benefits of each type of charge
Standard charges: Most lenders will accept a transfer or assignment of a standard charge from another lender. This means you can switch lenders without needing to discharge the existing charge and register a new one on your property title. This process is often simpler and less costly.
Collateral charges: With a collateral charge, you may be able to borrow additional funds against your property in the future without registering a new charge. Because the collateral charge can be registered for more than your initial mortgage amount, you can access extra funds without incurring additional legal and other fees.
How much does CIBC register the charge for?
Standard charges: CIBC registers the standard charge for the exact amount you borrow. For example, if you purchase a home for $500,000, and take out a mortgage loan for $250,000, CIBC registers the standard charge for $250,000.
Collateral charges: CIBC may register a collateral charge for up to or even more than the full value of the property. This allows you to borrow more money in the future, depending on your needs and financial plans.
For the CIBC Home Power Plan®, CIBC typically registers the charge for up to 100% of the property value. For example, if you borrow 80% of your home’s value, CIBC may register the charge for 100% (or more) of the home’s value. You only make payments and pay interest on the amount you actually borrow. The specific loan amount, interest rate, term and other mortgage details are outlined in a separate loan agreement.
For Real Estate Secured Loans and Lines of Credit, CIBC typically registers the collateral charge for the amount your approved to borrow.
What costs are involved when switching lenders?
Standard charges: At the end of your mortgage term, you can transfer your mortgage and the registered standard charge to another lender, provided the new lender agrees and the mortgage amount does not increase. If you transfer or pay out your mortgage before the maturity dateOpens a popup., you may be required to pay a prepayment chargeOpens a popup..
Collateral charges: At the end of your mortgage term, many new lenders will not accept a transfer of a registered collateral charge. In this case, you will need to pay fees to discharge the existing collateral charge and register a new charge with the new lender. If your collateral charge also secures other debts with your original lender, you must repay those debts before the charge can be transferred or discharged. As with standard charges, you may incur a prepayment charge if you transfer or pay out your mortgage before the maturity date.
How do I borrow more money?
Standard charges: To borrow additional funds, you must pay fees to discharge your existing standard charge and register a new charge for the higher amount. If you pay out your mortgage before the maturity date, a prepayment charge may also apply.
Collateral charges: With a collateral charge, you may be able to borrow more money without registering a new charge or incurring legal and other fees, as long as the collateral charge was registered for a high enough amount and you qualify for the additional funds. Prepayment charges may apply if the mortgage is transferred or paid out before the maturity date.
How do I discharge my registered mortgage charge?
Standard charges: When you pay off your mortgage in full, CIBC will release its interest in your property and register a discharge of the mortgage charge. There may be costs involved in registering the discharge, and a discharge fee may apply depending on your region.
Collateral charges: With a collateral charge, the charge may remain on your property even after you pay off the mortgage loan and any other amounts you have borrowed (such as revolving credit). This allows you to potentially borrow more funds in the future without registering a new charge, helping you avoid additional legal and other fees.
Once you have paid off all amounts secured by the collateral charge and closed any credit facilities secured by it, CIBC will discharge the collateral charge. As with standard charges, there may be costs and a discharge fee depending on your region.
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