When their mortgage term ends and it’s time to renew, homeowners are faced with an important decision: should they stick with their current lender, or switch to a new mortgage provider? In many cases, switching providers can save you money or help you get better mortgage terms that better suit your current lifestyle and financial goals. While this process can be done on your own with the help of a lawyer or notary to seal the deal, working with a mortgage broker (like us!) can make finding, comparing, and finalizing your mortgage renewal even more hassle-free. Read our advice below, then reach out to us for a no-obligation consultation for recommendations on your unique situation.
Can I switch mortgage providers any time or just when my mortgage renews? Which timing is better?
When you switch mortgage providers, the new provider essentially pays the old provider on your behalf and the balance you owe transfers over. If this happens at the end of your mortgage term (typically after 1, 3, or 5 years), there’s usually no pre-payment penalty like there would be if you switched mid-contract with a lender. This makes renewal time a great opportunity to explore your options with different lenders.
Why should I consider switching mortgage providers?
For many homeowners, the thought of switching mortgage providers doesn’t even cross their mind when their mortgage renews. While this makes the process super simple, they are also likely missing out on better rates or features that could better match their current needs. We always talk about finding the right mortgage for the right time in your life, and your financial goals and lifestyle have likely changed since you last shopped for a mortgage!
Switching mortgage providers gives you the opportunity to find the best mortgage for your current needs, which could bring these benefits:
- Lower interest rates, which could save you thousands over the lifespan of your mortgage!
- More flexible terms, or different policies like lower pre-payment penalties
- Improved customer service if you’ve had less-than-fantastic service with your current lender
How does switching mortgage providers work in British Columbia?
The process of switching mortgage providers happens well before you get that notice in the mail with your renewal offers 30 days before your term ends. We recommend starting your search at least 3-4 months before your mortgage term is about to expire. This gives you enough time to meet with a mortgage broker or do your own research and properly weigh the options you’ll have for the next 3-5 years.
1. Review Your Current Mortgage
Before starting to shop around, review your current mortgage terms and write them down so you can easily compare your current rate with rates from other providers. Namely, you’ll want to know your current:
- Interest rate,
- payment frequency,
- remaining amortization, and
- Pre-payment privileges, if any.
2. Shop Around (With Help!)
Once you know your current terms, it’s time to research what your renewal options are. Working with a mortgage broker like Auxilium Mortgage takes the stress out of finding new mortgage options. Let us deal with sifting through fine print and shopping the marketplace of lenders on your behalf! If you’re shopping on your own, identify which factors are most important to you: are you willing to take a slightly higher interest rate if it means you can pay off part of your mortgage early with less of a penalty? Would you prefer a fixed mortgage for consistent mortgage payments?
3. Apply for a New Mortgage
If you decide to switch to a new provider at renewal, your mortgage broker will help you complete a new mortgage application. Since you’ll essentially be starting the mortgage process over, you’ll likely need to provide documentation like your proof of income and property tax statements. Your new lender may offer discounted legal fees to cover the switching costs as long as you’re not increasing the amount of your loan, or provide you with a reimbursement or cash back to offset costs & legal fees when you’re needing to increase the amount of your loan. However there is no “one size fits all” when it comes to this and varies from lender to lender.
What are the costs associated with switching mortgage providers at renewal?
Switching mortgage providers at renewal is usually cost-effective, however there may be some additional fees to cover, such as a discharge fee from your current lender, legal, notary, and administrative fees, and potentially an appraisal fee if the new lender requires your property’s current value.
4. Finalizing the Mortgage Transfer at Your Renewal Date
Once your new mortgage is approved (congrats!) and the legal paperwork is finalized, your new lender will coordinate with your previous mortgage provider to transfer your mortgage on the renewal date, and you’ll start making payments to the new provider.
How should I prepare for a mortgage renewal?
- Know your renewal date and mark it and the date 90-120 days in advance on your calendar so you’re not caught off guard when the date arrives.
- Get pre-approved early so you can lock in a good rate
- Work with a mortgage broker who has access to a wide range of lenders, so you can really explore your options.
- Consider your future plans, as you’ll have this mortgage for the next few years. Are you planning on moving? Refinancing? Paying down your mortgage aggressively?
Auxilium Mortgage takes the stress out of switching mortgage providers
No matter if you’ve got a great credit score or a few bruises on your credit report, our goal at Auxilium Mortgage is to work with you to find the right mortgage solution for where you are at financially right now. Our team in Victoria, BC knows the local market and is committed to providing the support to find you the best mortgage as stress-free as possible. We’ve helped hundreds of clients across BC make smart mortgage moves at renewal time, and we can help you too!