A collateral charge mortgage is a readvanceable mortgage product. 

In short, the charge on title can actually be registered for more than the amount you are borrowing. 

The purpose of this is to give you the ability to access further equity without completing a full refinance.

Having the flexibility & ability to borrow more money from your home at anytime without completing a full refinance & paying legal fees.

This would need to be completed with the existing lender.

The main benefit is to avoid legal costs which are roughly $1,000 for a refinance.

Typically a legal bill will be triggered upon renewal if you are trying to switch your mortgage to another lender, whereas with a standard mortgage charge there are usually no legal costs.

If you were applying for a second mortgage with another lender the collateral charge sometimes needs to be capped at the balance, however, this is usually not an issue.

Don’t overthink this.

In either situation there is potential to save the costs of a legal fee.  If you think you will be borrowing from your homes equity within the term it could make sense to register a collateral charge for a higher amount.

• A HELOC is a readvanceable line of credit which is secured to your home equity.
• Most people would be familiar with an unsecured LOC which can be approved by your institution, but because a HELOC is secured to your home the rate is much lower.
• The product is fully open with no penalties to prepay early.
• Rates are usually set at Prime + .50%.
• You have the ability to make interest only payments if needed.
• You do not pay interest if you are not using funds from the LOC.
• HELOC’s are harder to qualify for compared to a standard mortgage.

This is an excellent tool to set up at time of purchase or refinance even if you have no immediate use for the HELOC.  

Any mortgage lender offering a Home Equity Line of Credit must register the mortgage on title as a collateral charge.