In the news recently there's been a lot of talk of how TD is now registering ALL their mortgages as collateral mortgages. Some say this is a good thing, I truly believe it's not.
This isn't to say TD is the only one that does this. Most credit unions do and any time you bundle your mortgage with line of credits, visa's etc the same registration takes place.
This can be at 100% of the homes value a little less or in TD's case 125% of the homes value. However, in order to access the funds you have to re qualify. Dumb.
Here's just one example of why in my opinion this is a bad thing. Besides the obvious fact that the banks are giving people access to too much debt.
I have a great couple that just celebrated two daughters weddings. They used their credit cards and line of credit to pay for this. They unfortunately missed a couple payments and now their credit bureau doesn't look so good. So of course to go back to their credit union to advance some of those funds they have available they'll need to requalify. Well they can't.
The proposed solution is to do a one year second mortgage to clear things up and in a year redo their mortgage and roll everything into one.
Makes sense right?
Well in two words, they can't.
Now they're stuck with too much debt and will struggle and struggle to keep their payments up. Of course they should have consulted us first, however, when you're in the moment and you have two girls on you for wedding money, your mind isn't always there!
I just hope they can sustain the debt for another year or two so we can look at a solution at this time.
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Please MAKE SURE that you're mortgage is not registered as a collateral mortgage. The banks wont tell you they're doing it as it ties you into them and their one or two products. The only way out is to do a refinance.
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