Most Canadians do not know whether their mortgage is registered as collateral or conventional — and the difference can cost you $1,000+ if you try to switch lenders at renewal. TD, Tangerine, and National Bank default to collateral registration (up to 125% of your home’s value), which makes accessing more funds later easier but creates a significant switching barrier. Understanding this distinction before signing is critical for keeping your options open.
Collateral vs Conventional Mortgage
| Feature | Collateral Mortgage | Conventional Mortgage |
|---|---|---|
| Registration | Loan against property (up to 125%) | Specific mortgage amount |
| Adding funds | Easier (no re-registration) | Requires new registration |
| Switching lenders | More expensive | Lower cost transfer |
| Transfer at renewal | Must discharge and re-register | Can assign/assume |
| Second mortgage | Generally not possible | Available from other lenders |
| Used by | TD, Tangerine, National Bank | Most other lenders |
How Each Type Works
Conventional Mortgage
| Feature | Details |
|---|---|
| Registration | Exact mortgage amount registered |
| Example | $400,000 mortgage = $400,000 registered |
| At renewal | Can transfer to new lender (assignment) |
| Adding HELOC | Separate registration needed |
| Second mortgage | Another lender can register behind first |
Collateral Mortgage
| Feature | Details |
|---|---|
| Registration | Higher amount (often 125% of value) |
| Example | $500,000 home = up to $625,000 registered |
| At renewal | Must fully discharge and re-register |
| Adding HELOC | May be included in same registration |
| Second mortgage | Usually not possible (no room in registration) |
Cost Comparison: Switching Lenders
Conventional Mortgage
| Cost | Amount |
|---|---|
| Assignment fee | $200-400 |
| Legal/admin | Minimal |
| Total | $200-400 |
Collateral Mortgage
| Cost | Amount |
|---|---|
| Discharge fee | $200-400 |
| New registration | $300-500 |
| Legal fees | $500-1,000 |
| Total | $1,000-1,900 |
Who Uses Which Type
Collateral Mortgage Lenders
| Lender | Default Registration |
|---|---|
| TD Bank | Collateral (TD Home Equity FlexLine) |
| Tangerine | Collateral |
| National Bank | Collateral |
| Some credit unions | Varies |
Conventional Mortgage Lenders
| Lender | Default Registration |
|---|---|
| RBC | Conventional |
| Scotiabank | Conventional (STEP is collateral) |
| BMO | Conventional |
| CIBC | Conventional |
| Most monolines | Conventional |
Advantages of Collateral Mortgages
Easier Access to Equity
| Benefit | Details |
|---|---|
| Borrow more later | Without new registration |
| Built-in HELOC potential | May be included |
| Lower cost to add funds | No legal fees |
| Readvanceable | As you pay down mortgage |
Example: Future Borrowing
| Scenario | Collateral | Conventional |
|---|---|---|
| Have $300K mortgage | — | — |
| Want $50K HELOC later | Request from lender (no cost) | New registration ($500-1,000) |
Disadvantages of Collateral Mortgages
Switching Costs
| Impact | Details |
|---|---|
| Renewal negotiation | Less leverage |
| Can’t easily transfer | Higher costs discourage switching |
| Lender knows this | May offer less competitive rates |
Limited Secondary Financing
| Impact | Details |
|---|---|
| Second mortgage | Hard to get |
| Other HELOCs | Registration is full |
| Investment loans | May be blocked |
Example: Second Mortgage Blocked
| Situation | Collateral | Conventional |
|---|---|---|
| Home value | $700,000 | $700,000 |
| First mortgage | $400,000 | $400,000 |
| Registered amount | $875,000 (125%) | $400,000 |
| Room for second mortgage | None | $160,000 (80% LTV minus mortgage) |
Readvanceable Mortgages
What They Are
| Feature | Details |
|---|---|
| Structure | Mortgage + HELOC combined |
| Type | Usually collateral-based |
| How it works | As mortgage paid down, HELOC increases |
| Examples | TD FlexLine, Scotia STEP |
How Readvanceable Works
| Year | Mortgage | HELOC Available | Total Registered |
|---|---|---|---|
| Start | $400,000 | $0 | $500,000 (80% of $625K home) |
| Year 5 | $340,000 | $60,000 | $500,000 |
| Year 10 | $260,000 | $140,000 | $500,000 |
Making the Decision
Choose Collateral If:
| Situation | Why |
|---|---|
| Plan to stay with lender long-term | Switching cost doesn’t matter |
| Want easy access to equity | Avoid re-registration costs |
| Will use readvanceable features | Valuable flexibility |
| TD/Tangerine offers best rate | May be worth it |
Choose Conventional If:
| Situation | Why |
|---|---|
| Like to shop rates at renewal | Easy transfer |
| May need second mortgage | Keep options open |
| Value flexibility | Not locked in |
| Uncertain about staying with lender | Lower switching costs |
What to Do If You Have a Collateral Mortgage
At Renewal
| Strategy | Action |
|---|---|
| Negotiate hard | Lender knows switching costs |
| Get competing quotes | Show them to your lender |
| Calculate break-even | Is switching worth the cost? |
| Consider staying | If rate is competitive |
Break-Even Calculation
| Factor | Amount |
|---|---|
| Switching cost | $1,500 |
| Mortgage amount | $300,000 |
| Rate difference needed | 0.1% annually = $300 |
| Years to break even | 5 years |
If you can save more than 0.1%, switching may be worth it.
Questions to Ask Your Lender
| Question | Why It Matters |
|---|---|
| Is this a collateral or conventional mortgage? | Know your registration type |
| What amount will be registered? | Understand collateral amount |
| What are the discharge costs? | Know switching costs |
| Can I get a second mortgage later? | Future flexibility |
| Is this a readvanceable mortgage? | Understand the structure |