The number of people who naïvely claim that they don’t have a mortgage always amazes me. Many clients do not appreciate when a mortgage is registered against their home.
In an age of extensive consumer protection laws and regulated banking, how do people end up with mortgages that they are unaware of? The answer lies in the fact that many consumers unknowingly use their homes as security for loans and lines of credit.
Unsecured borrowing occurs when no security is taken by the bank or finance company. The loan is offered to you based on your promise to repay it and the lender’s confidence in your ability to repay. With secured borrowing, the lender has a legal charge, a mortgage, over your property.
If you do not make your payments, the lender could foreclose on the property to get their money back.
Products like the Total Equity Plan, HomeLine Plan, HELOC (Home Equity Line of Credit) and the Secured Borrowing Account are becoming more common. They are marketed as simple, convenient and cheaper alternatives to traditional lines of credit. However, they are rarely marketed as a mortgage.
While various lenders have branded their secured products differently, the common factor is that they all require a mortgage.
While a lawyer is required when purchasing a home, the secured loans may be established directly with the lenders. Surprisingly, the mortgages can be granted without ever meeting with a lawyer or receiving legal advice.
As a result, people end up with mortgages they unaware of.
Before signing up for you lender’s latest loan product, ask if it is a secured loan.
If it is, you should consult your lawyer before you end up with a mortgage that you don’t know you have.
– Elias Metlej is a real estate lawyer with the Halifax firm Blois Nickerson & Bryson. You can write to Elias at askelias@yahoo.com
