Difference Between A Standard And Collateral Mortgage

Cynthia Dreger • May 8, 2024

When arranging mortgage financing, your mortgage lender will register your mortgage in one of two ways. Either with a standard charge mortgage or a collateral charge mortgage. Let’s look at the differences between the two.


Standard charge mortgage


This is your good old-fashioned mortgage. A standard charge mortgage is the mortgage you most likely think about when you consider mortgage financing. Here, the amount you borrow from the lender is the amount that is registered against the title to protect the lender if you default on your mortgage.


When your mortgage term is up, you can either renew your existing mortgage or, if it makes more financial sense, you can switch your mortgage to another lender. As long as you aren’t changing any of the fine print, the new lender will usually cover the cost of the switch.


A standard charge mortgage has set terms and is non-advanceable. This means that if you need to borrow more money, you'll need to reapply and requalify for a new mortgage. So there will be costs associated with breaking your existing mortgage and costs to register a new one.


Collateral charge mortgage


A collateral charge mortgage is a mortgage that can have multiple parts, usually with a re-advanceable component. It can include many different financing options like a personal loan or line of credit. Your mortgage is registered against the title in a way that should you need to borrow more money down the line; you can do so fairly easily.


A home equity line of credit is a good example of a collateral charge mortgage.


Unlike a standard charge mortgage, here, your lender will register a higher amount than what you actually borrow. This could be for the property's full value, or some lenders will go up to 125% of your property's value. 


In the future, if the value of your property appreciates, with a collateral charge mortgage, you don't have to rewrite your existing mortgage to borrow more money (assuming you qualify). This will save you from any costs associated with breaking your existing mortgage and registering a new one. 


However, if you’re looking to switch your mortgage to another lender at the end of your term, you might be forced to discharge your mortgage and incur legal fees. Also, by registering your mortgage with a collateral charge, you potentially limit your ability to secure a second mortgage.


So what’s a better option for you?


Well, there are benefits and drawbacks to both. Finding the best option for you really depends on your financial situation and what you believe gives you the most flexibility. This is probably a question better handled in a conversation rather than in an article.


With that said, undoubtedly, the best option is to work with an independent mortgage professional. It’s our job to understand the intricacies of mortgage financing, listen to and assess your needs, and recommend the best mortgage to meet your needs. As we work with many lenders, we can provide you with options. Don’t get stuck dealing with a single institution that may only offer you a collateral charge mortgage when what you need is a standard charge mortgage. 


So if you’d like to have a conversation about mortgage financing, please get in touch. It would be a pleasure to work with you and answer any questions you might have. 


CYNTHIA DREGER

Mortgages Aren’t One-Size-Fits-All

By Cynthia Dreger • August 13, 2025
Why the Cheapest Mortgage Isn’t Always the Smartest Move Some things are fine to buy on the cheap. Generic cereal? Sure. Basic airline seat? No problem. A car with roll-down windows? If it gets you where you're going, great. But when it comes to choosing a mortgage? That’s not the time to cut corners. A “no-frills” mortgage might sound appealing with its rock-bottom interest rate, but what’s stripped away to get you that rate can end up costing you far more in the long run. These mortgages often come with severe limitations—restrictions that could hit your wallet hard if life throws you a curveball. Let’s break it down. A typical no-frills mortgage might offer a slightly lower interest rate—maybe 0.10% to 0.20% less. That could save you a few hundred dollars over a few years. But that small upfront saving comes at the cost of flexibility: Breaking your mortgage early? Expect a massive penalty. Want to make extra payments? Often not allowed—or severely restricted. Need to move and take your mortgage with you? Not likely. Thinking about refinancing? Good luck doing that without a financial hit. Most people don’t plan on breaking their mortgage early—but roughly two-thirds of Canadians do, often due to job changes, separations, relocations, or expanding families. That’s why flexibility matters. So why do lenders even offer no-frills mortgages? Because they know the stats. And they know many borrowers chase the lowest rate without asking what’s behind it. Some banks count on that. Their job is to maximize profits. Ours? To help you make an informed, strategic choice. As independent mortgage professionals, we work for you—not a single lender. That means we can compare multiple products from various financial institutions to find the one that actually suits your goals and protects your long-term financial health. Bottom line: Don’t let a shiny low rate distract you from what really matters. A mortgage should fit your life—not the other way around. Have questions? Want to look at your options? I’d be happy to help. Let’s chat.

What is a Cashback Mortgage?

By Cynthia Dreger • August 6, 2025
As the name implies, a cashback mortgage is similar to a standard mortgage, except that you receive a lump sum of cash upon closing. This lump sum will either be a fixed amount of money or a percentage of the mortgage amount, usually between 1-7%, depending on the mortgage term selected. How you use the cash is entirely up to you. Some of the most common reasons to secure a cashback mortgage are to: Cover closing costs. Buy new furniture. Renovate your property. Supplement cashflow. Consolidate higher-interest debt. Really, you can use the cash for anything you like. It’s tax-free and paid to you directly once the mortgage closes. Understanding the cost of a cashback mortgage. Now, while it might appear like a cashback mortgage is a great way to get some free money, it’s not. Banks aren’t altruistic; they’re in the business of making money by lending money. Securing a mortgage that provides you with cash back at closing will cost you a higher interest rate over your mortgage term. A cashback mortgage is like getting a fixed loan rolled into your mortgage. Your interest rate is increased to cover the additional funds being lent. Now, with so many different cashback options available and with interest rates constantly changing, it's nearly impossible to run through specific calculations on a simple article to outline how much more you’d pay over the term. So, if you'd like to identify the true cost of securing a cashback mortgage, the best place to start is to discuss your financial situation with an independent mortgage professional. When you work with an independent mortgage professional instead of a single bank, you receive unbiased advice, more financing options, and a clear picture of the cost associated with securing a mortgage. Getting cashback at closing is a mortgage feature that makes the bank more money at your expense. This isn’t necessarily a bad thing; the key is to be informed of the costs involved so you can make a good decision. Eligibility for a cashback mortgage. Simply put, a cashback mortgage isn’t for everyone. This is a mortgage product that has tougher qualifications than standard mortgage financing. Any lender willing to offer a cashback mortgage will want to see that you have stable employment, a fabulous credit score, and healthy debt service ratios. If your mortgage application is in any way “unique,” the chances of qualifying for a cashback mortgage are pretty slim. Breaking your mortgage term early. In addition to paying a higher interest rate to cover the cost of receiving the cashback at closing, a cashback mortgage also limits your options down the line. If your life circumstances change and you need to break your mortgage mid-term, depending on the conditions set out in your mortgage contract, you’ll most likely be required to either pay all of the cashback received or at least a portion, depending on how long you’ve had the mortgage. As all cashback mortgages are tied to fixed-rate terms, so in addition to repaying the cashback, you’d also be required to pay the interest rate differential penalty; or 3 months interest, whichever is greater for breaking your mortgage term early. Sufficed to say, should you need to pay out your mortgage early, breaking your cashback mortgage will be costly. Certainly, this is something to consider when assessing the suitability of this mortgage product. Get independent mortgage advice. Understanding the intricacies of mortgage financing can be difficult at the best of times. With all the different terms, rates, and mortgage products available, it’s hard to know which mortgage is best for you. So while a mortgage that offers a cash incentive upon closing might initially seem like an attractive offer, make sure you seek out the guidance of an independent mortgage professional to help you navigate the costs associated with a cashback mortgage. While it might be a great option for you, there might be other mortgage options that better suit your needs. It's worth a conversation for sure! If you’d like to discuss what a cashback mortgage or any other mortgage product would look like for you, please get in touch. It would be a pleasure to work with you.