Introduction
When your first mortgage type or term is near its end, it means you have to decide whether you want to renew with the same lender or consider moving to another. Most people forget the advantages of moving to a different mortgage type or lender at the renewal date, but sometimes, it may help one save money, secure even better terms, or be in line with the intended financial goals. This option, however, has pros and cons of its own. Let’s break everything down.
Understanding Mortgage Renewal
A mortgage renewal occurs at the end of your mortgage term, which is the agreed-upon duration of your mortgage contract. In Canada, most mortgage terms last five years, though they can range from six months to 10 years. At the end of the mortgage term, unless you’ve paid off your balance, you’ll need to renew your mortgage.
Your current mortgage lender is legally obliged to send you a renewal notice at least 21 days before your mortgage term first expires, so you have time to review your options: perhaps renew your mortgage sooner with your current lender or shop around for better mortgage lenders.
Reasons to Switch Mortgage Providers
Switching mortgage providers is helpful if your current lender or mortgage no longer fits your financial needs. Some common reasons for switching mortgage providers include:
Lower Interest Rates: If another lender offers a lower interest rate, you can also save money on monthly mortgage payments.
Better Terms: The option for flexible payment frequency or prepayment privileges.
Amortization Adjustments: You may want to amortize your loan to decrease monthly payments.
Additional Services: Some lenders offer perks like lower mortgage rates, discounts, or better customer service.
However, switching providers isn’t always free, and to make the switch, you’ll need to weigh potential costs against the benefits.
Costs of Switching Mortgage Lenders
Switching mortgage lenders involves certain fees and expenses, and many lenders vary depending on your current mortgage and new, mortgage type, mortgage business, mortgage type, and lender. Here are the common costs of switching mortgages too:
Mortgage Discharge Fee: Paid to your current mortgage lender to release your existing mortgage, typically the mortgage discharge fee amount is between $300 to $400.
Appraisal Fee: This covers the cost of legal fees, additional costs of assessing your property’s value, and property insurance, which can range from $300 to $500.
Assignment Fee: May the assignment fee be the mortgage amount required to transfer the mortgage from the old lender to the new lender.
Legal Fees: For the assignment fee and legal paperwork additional costs and other fees associated with legal paperwork along other fees along with closing the transfer.
Some lenders can take certain fees and offer incentives to pay for those fees, so be sure to ask about promotions or discounts.
The Switching Process
This is a process almost as if one were applying for a new mortgage. Here’s how it works:
Research Lenders: Compare rates, terms, and other benefits from multiple mortgage providers.
Formal Mortgage Application: Apply for a new mortgage by submitting the relevant documents.
Payout Statement: a payout statement. Your new lender will request a payout statement from your old lender and mortgage to another lender, regarding your existing mortgage balance monthly payments, and terms.
Legal Documents: Obtain all the legal papers required to transfer the mortgage from an existing lender to another lender.
Transfer Completion The new lender completes the transfer process, and the current lender takes over the mortgage.
Evaluating Lenders and Mortgage Options
Switching and then switching providers and then switching mortgage providers often requires finding the best mortgage suitable to your needs. Here’s how to do it:
Compare Rates: Look for many competitive rates and mortgage rates from various lenders to ensure you get the best available deal.
Working with a mortgage broker can tap into their enormous network of lenders to cut through much red tape.
Check Terms and Conditions: Know your prepayment options, amortization period, and costs.
Look Beyond Rates Consider factors like customer service, your payment frequency, flexibility, and additional fees.
Negotiating with Your Current Lender
Before switching to another mortgage business or switch lenders, try negotiating with your current bank mortgage broker, or your other current bank and lender first. Most lenders want to keep your business and may match or beat offers from switch lenders or competitors. Use the following strategies:
Present Competitive Offers: Share the competitive rates and terms you’ve found from other lenders.
Request Discounts: Demand a lower interest rate, better, prepayment options, additional fees, privileges, or reduced fees.
Early Renewal Options: Some lenders allow renewal of your mortgage earlier in life without charges.
That is negotiating, which can save the hassles and costs involved in a mortgage application to switch lenders on your mortgage, while still improving your mortgage terms.
Alternatives to Switching Lenders
It’s not the only method for better terms, though. Consider these alternatives:
Early Renewal: You may be allowed to renew your mortgage early and lock into a fixed rate mortgage, switch your mortgage to, or switch your mortgage to at a lower rate with, or switch your mortgage lender.
Refinancing: You can use this option if you want to access equity for other debts or consolidate other debts.
Porting Your Mortgage: If you are moving, some lenders allow you to port your existing mortgage to a new property.
FAQs About Switching Mortgage Lenders
1. Can I change mortgage providers at renewal?
Yes, you can change your mortgage lender before or at the maturity date for renewal of the mortgage contract, but there might be penalties or extra due costs involved for breaking an existing mortgage contract too early before the maturity date.
2. Should I change my mortgage lender?
If you can obtain a better mortgage faster, interest rate or conditions, it may pay to do so. Compare possible savings on mortgage payments, with the costs incurred.
3. What happens if I remortgage to a new lender?
The new lender pays off your existing mortgage faster, and you start fresh with your mortgage sooner than the new lender under different terms.
4. Is there a penalty for switching mortgage lenders?
There are no penalties at renewal, but you may have to get property insurance and pay some fees, such as appraisal fees and discharge fees.
5. Can I transfer my mortgage to another lender?
You can transfer your mortgage and switch lenders to an existing lender. You apply with the new lender and complete the legal transfer process part of a formal mortgage application transferring the amount to switch your first mortgage to another lender.
Tips for a Smooth Transition
Plan Early: You should begin researching your options for switching mortgage lenders at renewal at least three to four months before your mortgage renewal date. This will allow you to have enough time to compare lenders, and their offerings, and avoid last-minute decisions. Planning in advance will help you ensure that you lock in the competitive mortgage rates before they change.
Crunch the Numbers: Calculate all costs of transfer, including appraisal fees, discharge fees, and legal fees. Compare these to the savings from a lower, interest rate differential or better terms. Look at online mortgage calculators to see what your monthly mortgage payment would be as well as your long-term savings.
Ask for Incentives: Most lenders are offering attractive incentives to gain your business. For example, they cover some of the fees; cashback is offered, or a reduced interest rate differential is given. It pays to ask new to switch lenders, your mortgage lenders, for fee rebates or discounts that could mean huge out-of-pocket cost savings.
Get Expert Advice: An informed, experienced mortgage broker or financial planner can guide the way concerning market trends and lender’s policies and some pitfalls that may arise and help them in negotiating more favorable terms and ensure this change goes in line with their plans.
Conclusion
This could be the time to make the switch and change mortgage when many lenders are on renewal for a good reason: a lower interest rate, better terms, a fixed rate mortgage, or even an opportunity to save a mortgage amount or lump sum of money. But before that, there are certain potential costs and challenges against those benefits, so consider it all carefully before you switch your mortgage or ever switch mortgages again. First of all, discuss your options with your existing lender and, if necessary, consider an early renewal.
Whatever you choose, make sure it is aligned with your financial goals and helps you find the best mortgage for your needs.
If you’re ready to explore your options, contact Shelto Mortgage for expert guidance and personalized mortgage solutions.
