Glossary
Collateral Mortgage
A mortgage registered as a collateral charge that can secure other borrowing and may make switching lenders more complicated..
A collateral mortgage is a mortgage registered against a property as a collateral charge rather than as a standard charge. One registration can secure the mortgage plus other borrowing, such as a home equity line of credit or future advances, and the structure is common at several Canadian banks and credit unions.
How a collateral charge works
With a standard charge, the registration matches the mortgage itself: repay the loan and the charge is discharged. A collateral charge is drafted more broadly. It lets the lender secure the mortgage along with other debts under a single registration, and it may be registered for an amount above the current mortgage balance so the lender can readvance funds later without registering again.
How these charges are registered falls under provincial land title and mortgage legislation, and the rules differ across the country. During the term, the borrower usually notices no difference: payments, rate and amortization work the same way.
Why it matters when you switch or refinance
The difference shows up when you want to move. Because a collateral charge secures more than just the mortgage, many lenders will not simply take over the existing registration. A borrower moving to a new lender often has to discharge the collateral charge and register a fresh mortgage, which can add legal costs, a possible appraisal and a discharge fee on top of any prepayment penalty for breaking the term. Our guide on how to switch mortgage lenders in Canada walks through the sequence.
There are trade-offs in the other direction. Borrowing more from the same lender can be quicker and cheaper because a charge is already on title. A readvanceable mortgage relies on this structure.
| Feature | Standard charge | Collateral charge |
|---|---|---|
| What it secures | The mortgage only | Mortgage plus other lending |
| Registered amount | Typically the mortgage amount | Often set above the balance |
| Moving lenders | Often simpler | Usually needs a discharge |
What to check before you sign
- Ask whether the mortgage will be registered as a standard or a collateral charge.
- Ask whether the registration secures only the mortgage or other products too.
- Ask what steps and costs apply if you later move to another lender.
- Confirm whether a mortgage switch is possible without discharging the charge.
Frequently asked questions
Is a collateral mortgage bad?
Not by itself. It is a legal structure, not a rate or a fee, and many borrowers hold one without any issue during the term. The main drawback is flexibility: moving to another lender usually means discharging the charge and registering a new mortgage, which can add costs. Ask your lender which structure it uses before you sign.
Can I switch lenders with a collateral mortgage?
Yes, but the process is usually heavier than a simple transfer. Because the charge can secure more than the mortgage, a new lender typically cannot assume it. You normally discharge the collateral charge, pay any discharge and legal costs, and register a new mortgage. Confirm the steps and costs in writing with both lenders first.
How do I find out if my mortgage is a collateral charge?
Check your mortgage documents and commitment letter, and look at the land title record for your property. The registration wording shows whether the charge is collateral or standard and whether it secures other products, such as a line of credit. Your lender or a title search through your province's land registry can confirm it.
Sources
Related terms
- Mortgage Switch — A mortgage switch moves your existing mortgage to a new lender at renewal while keeping the same balance, amortization, and payment structure.
- Home Equity Line of Credit (HELOC) — A revolving credit line secured by your home, usually capped at 65% loan-to-value and typically priced off the lender's prime rate.
- Mortgage Refinance — Replacing an existing mortgage with a new one, often to change the rate, term, or amortization, or to access home equity.
- Discharge Fee — A discharge fee is a lender charge for removing a paid-off mortgage from the property's title and confirming the loan is cleared.
- Readvanceable Mortgage — A mortgage paired with a line of credit whose limit increases as you repay mortgage principal, keeping total available borrowing roughly steady.