Short answer: a collateral charge mortgage registers your home as security for up to 125% of its value, instead of just your actual mortgage amount, which makes it easier to borrow more later but harder and more expensive to switch to a different lender at renewal.
Standard Charge vs. Collateral Charge
A standard charge mortgage registers your home as security for exactly your mortgage amount. It's straightforward to transfer to a new lender at renewal, since the new lender can simply take an assignment of the existing charge. A collateral charge registers your home for up to 125% of its appraised value, which gives you room to borrow more later (through a HELOC or a top-up) without re-registering, but it's structured differently enough that most other lenders won't just take it over.
Why Banks Default to Collateral Charges
Most major banks now register mortgages, and especially any mortgage that includes a HELOC component, as collateral charges by default. It's genuinely convenient if you plan to borrow more against your home later, since you can access additional funds without a full refinance, new legal fees, or a new registration. The bank benefits too, since it makes it harder for you to leave.
The Catch at Renewal
- A new lender generally can't simply assume a collateral charge, since it isn't registered as a standard, transferable mortgage.
- Switching usually means a full discharge of the old charge and a new registration with the new lender, similar to a refinance.
- That means new legal fees, a new appraisal in some cases, and more paperwork, costs a standard-charge switch wouldn't carry.
- Some lenders will cover part of these costs to win your business, but it's not guaranteed, and it's a cost a standard charge simply doesn't create.
How to Tell Which One You Have
Check your mortgage commitment letter or call your lender directly and ask whether your mortgage is registered as a standard charge or a collateral charge. It's set at the time your mortgage is registered and doesn't change on its own, so it's worth knowing well before your renewal date, not after you've already tried to shop your rate elsewhere.
Not Sure What You Have?
If your renewal is coming up and you want to know whether switching lenders is actually realistic for you, send us your mortgage documents and we'll tell you straight.