With interest rates on the rise, switching mortgage lenders, or changing your mortgage from a variable rate to a fixed rate may have crossed your mind as an option to avoid an increasing mortgage payment or perhaps take advantage of a better rate than your current rate. The good news is that switching mortgage lenders is almost always possible. The downside is that it comes at a cost that sometimes may outweigh the benefits of making the switch. The costs of switching a mortgage can be substantially lower if you switch mortgage lenders when your current mortgage term is up for renewal, so to avoid, or minimize penalties from your current mortgage lender. It is also important to start the switching process at least 2-3 months prior to your current term expiring as it takes time to process your application and coordinate the switching of your mortgage.
What are typical costs to switching mortgage lenders?
There are several fees when it comes to switching lenders. In some cases, your new lender will cover these costs to get your business but always confirm up-front, just to be sure.
Costs can include:
- Setup fees with the new lender, which may include discharge, registration, transfer or assignment fees from your current lender
- An appraisal fee to confirm the value of your property may apply in some circumstances
- Other administration fees may exist depending on the lender and the province you reside in
- Legal and registration fees
- Penalties from your current mortgage lender (if you are not switching at the expiry of your current term).
A mortgage renewal can sound and feel overwhelming. For this reason, there are several essential things to keep in mind to help ensure your mortgage renewal runs smoothly.
First, try to avoid any of the following to keep all your options open:
- Leaving your renewal to the last minute
- Signing a renewal letter with your current lender without looking at other options
When and how to shop around before mortgage renewal
Many savvy Canadians take this opportunity to shop around for the best rates and mortgage products and may engage a mortgage broker in the process. A mortgage broker typically has access to dozens of lenders and can match your needs with the best mortgage products based on understanding your financing goals and needs. You can also choose to shop around directly with various banks prior to your renewal, however, in most cases, using a mortgage broker saves you time and money. Mortgage Brokers are paid a commission by the lender, which means there’s usually no cost to use a broker to shop around for you and match you with the best product.
Closing a mortgage switch
Once you made the decision to move forward with switching mortgage lenders and have been approved by a new mortgage lender, you will need to close your mortgage switch.This process involves paying off the balance of your mortgage to your current mortgage lender, and discharging your current mortgage. Your lawyer would subsequently register the mortgage in your new mortgage lender’s name.
At Deeded, we can make your mortgage switch closing experience seamless with our virtual closing process.