When applying for a mortgage, we’re familiar with asking about the term, amortization, interest rate, and monthly payments. There’s another aspect to be aware of. Some Mortgage Lenders are now asking Borrowers to sign Collateral Mortgages — and it could result in a Borrower being tied to that Lender for longer than anticipated.
The downsides of a Collateral Mortgage can be summed-up as:
- It may take away a Borrower’s leverage in terms of being able to easily transfer the mortgage, at renewal, to another Lender for a better rate.
- A Lender may use the Collateral Mortgage to offset unpaid debts other than the mortgage.
- With a Collateral Mortgage, if in arrears or default, the Lender could raise the interest rate as penalty.