What Taylor Swift & Frank Sinatra Teach Us About Your Mortgage Control (Yes, Really!)
Jonah Hoyos
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You might be surprised how the music careers of Taylor Swift and Frank Sinatra relate to your mortgage, but bear with me, because their well-known battle over their music masters offers a surprisingly clear analogy for a specific type of mortgage that's common in Canada: the collateral charge mortgage.
A collateral charge mortgage is registered for more than you initially borrow (e.g., 100-125% of your home's value), even if your loan is smaller.
The Double-Edged Sword of Control
Just as artists like Sinatra and Swift might initially sign with a record label for vital financial backing and massive reach, collateral charge mortgages offer similar appeals:
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For the Artist (with a label): Access to significant capital, powerful marketing, and wide distribution otherwise hard to achieve.
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For the Homeowner (with a collateral charge): Primarily, convenient access to future borrowing with the same lender, like a Home Equity Line of Credit (HELOC), saving on legal fees for future funds.
However, both artists eventually realized these arrangements came with a cost to their ultimate control. Similarly, a collateral charge can limit your flexibility:
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Switching Lenders: Because your mortgage is registered for a higher amount, changing lenders typically means paying significant legal fees to discharge the old mortgage and register a new one, even for a better rate.
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"Trapped" Feeling: This friction can make you feel tied to your current lender.
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Automatic Re-Advances: While convenient, the lender has the right to lend you more up to the registered amount without a new application, potentially leading to more debt if not carefully managed.
Take Control of Your Financial "Masters"
Collateral charge mortgages have benefits, but understanding their long-term implications for flexibility and potential costs is crucial. Just like Taylor and Frank eventually fought to own their masters, understanding your mortgage structure gives you back control.
Are you unsure if you have a collateral charge, or how it impacts your plans? Let's connect for a brief, no-obligation chat. Ensure you have the flexibility and control you deserve over your home financing.
