The Canadian housing market may be cooling down and property values are rising but this does not mean that people are lining up the banks to get a mortgage on their homes. In fact, because of the stiff competition to get new business, banks are coming up with different strategies and gimmicks to lure in customers. TD Bank, for one, is revamping its mortgage program to ensure that homeowners can easily tap into their equity but not switch to another lender when mortgage is up for renewal.

TD Bank’s overhaul of its mortgage program is centered on its switch from traditional mortgages to collateral charge mortgages, which is very much like lines of credit. This form of mortgage makes it difficult to transfer from one lender to another because the mortgage must be paid in full first. So if a change of lender is needed or wanted, renegotiation must be done from scratch.

The switch to collateral mortgage will start on the 18^th of October and encourages employees to approve up to 125% of home’s actual value. This means that if the property increases in value, then the borrower can cash out more. But money cannot be withdrawn by just a simple phone call; TD Bank would still need to reassess the home and look at rising values.

Other banks also offer collateral mortgages but TD Bank is the first one to exclusively offer it to new borrowers (existing mortgages will not be affected). As a strategy to pull in new customers, TD poses the move as good news for both brokers and the customers as it will mean no additional charges for tapping into rising equity.

“Customers may under many circumstances choose to register their collateral charge for more than the approved principal amount of the mortgage, up to 125 per cent of the property value. This will allow them to borrow additional funds in the future without having to re-register … eliminating any solicitor and in-house registration fees,” reads the banks memo to its mortgage brokers.

Other banks have made their own strategies for attracting customers. Bank of Montreal is now offering a 3.59% rate on a five-year term, the lowest among all banks. Bank of Nova Scotia, on the other hand, allows customers to split mortgages into 2 to 3 different components, each with their own terms.