Putting aside the usual concerns about collateral charges, a leading broker wants lenders to do something about the associated cost of title insurance – some of his clients paying double what they’d otherwise have to.
“I just had a client whose title insurance cost was about $1,300 because of this when it would have been around $600 otherwise,” said Jim Tourloukis, the leading Ontario broker on last year’s CMP Top 50. “When registering the mortgage to 100 per cent, what ends up happening is the client is left paying a higher cost in title insurance, (considering) the cost of title insurance increases with the size of the mortgage that is registered.”
Those client concerns – shared by brokers – are increasingly cropping up as more banks move to register their mortgages with collateral charges.
Brokers continue to grapple with the well-known limitations associated with those loans and whether to put clients into them.
While readvanceable mortgages allow clients to re-borrow the principal they’ve paid off on their mortgage, up to 80 per cent of the value of the property, and to avoid upfront legal costs, they also mean the lender will register a collateral charge on the home for usually 100 per cent of the value.
That effectively means the mortgage must be entirely discharged in order for a borrower to transfer it to a new lender at renewal or for refinancing.
Still, that’s often of minor interest to clients at the time of signing than the hefty insurance costs they face as a result, said Tourloukis.
“Of course, there are other issues with this 100 per cent registration, but this issue of title insurance is at the forefront for the client at time of closing,” said Tourloukis, owner of Advent Mortgage Services in Unionville, Ontario. “There is a major flaw with registering mortgages to 100 per cent of the value of the home. Hopefully they (lenders) recognize this and change this policy.”
They may not have to, with at least one of the Big Five increasing its broker market share despite its decision to register all mortgages with collateral charges starting in 2010.