Of every decision covered in this course, charge type is the one most likely to be made without the client — or even the broker — realizing a decision was made at all. It rarely comes up in a rate conversation, it does not appear on most rate-comparison tools, and its consequences do not show up until the client tries to switch lenders years later and discovers it costs more and takes longer than they expected. Treating charge type as a genuine selection factor, discussed with the client up front, is one of the more valuable habits a broker can build.
A standard charge (sometimes called a conventional charge) is registered on title for the specific mortgage amount only — not a penny more. Because the registered amount matches the actual loan, a standard charge can typically be assigned to a new lender at renewal or through a straightforward switch, without a full discharge and re-registration on title. This keeps switching costs low, often minimal, and gives the client real, low-friction leverage to move to a better rate or product elsewhere when their term comes up.
A collateral charge is registered for a larger amount than the actual mortgage — commonly up to 125% of the property's value — which gives the lender room to advance additional secured credit later (a HELOC, a top-up, a re-advanceable structure) without registering a brand-new charge each time. This is a genuine convenience for a client who expects to borrow more against the property later.
The cost of that convenience shows up specifically when the client wants to leave. A collateral charge generally cannot be assigned to a new lender the way a standard charge can, because the amount registered does not correspond simply to the outstanding mortgage balance — a new lender cannot straightforwardly step into a charge that was structured around the original lender's total indebtedness framework. Switching lenders therefore requires a full discharge of the existing collateral charge and a fresh registration with the new lender, which involves real legal fees, commonly in the several-hundred-dollar range, and more time than a simple assignment would take.
Some major Canadian lenders register all, or nearly all, of their residential mortgages as collateral charges by default, regardless of whether the client has any near-term plan to borrow more against the property — meaning a client can end up with a collateral charge purely because of which lender they chose, without ever being told this was the trade-off, or given the option of a standard charge instead. Other major lenders continue to default to standard charges for ordinary purchase and refinance mortgages. Because this varies by lender and is not always volunteered clearly at the point of sale, a broker should ask directly, for any lender being considered, which charge type applies to the specific product — rather than assuming, or discovering it only when a client later tries to switch.
This is not a case where one charge type is simply better — a client who genuinely plans to draw more equity later may value the flexibility a collateral charge (often paired with a re-advanceable structure, module 06) provides enough to accept the switching cost as a fair trade. The failure mode this module is guarding against is a client ending up with a collateral charge by accident, having never been told the trade-off existed at all.
A client's mortgage is registered as a collateral charge for 125% of their home's value. Two years later, at renewal, they want to switch to a different lender offering a better rate. What does the collateral charge mean for that switch?
The registered amount on a collateral charge does not equal the client's actual debt — it is a ceiling that allows for future secured borrowing — but that same feature is exactly why it cannot be simply assigned the way a standard charge can, forcing a discharge-and-re-register process at the client's cost when moving lenders. The client is not barred from switching altogether, and the 125% figure is not what they owe; it is the framing this module specifically warns against — treating charge type as a minor technicality until it becomes a real, avoidable cost at exactly the moment a client is trying to act on a better rate.
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