Is switching your mortgage a good idea?
You’ve heard about the switch mortgage and know that it means moving your mortgage to another lender but don’t quite understand the whole story.
I think that the best way to tackle the switch mortgage subject is to answer some of the many questions we’ve had over the last little while.
First off, when you get that renewal notice in the mail, do yourself a favor and don’t just sign it and accept the lenders interest rate and terms without giving us the opportunity to see if we can get you a better deal.
Banks make some real good money with renewals when people just sign the renewal and send it back. Remember, there’s no cost or obligation to have us take a look.
Why would I want to switch my mortgage to another lender?
There are several reasons why people switch their mortgages, but the primary reason is that another lender is offering a better interest rate or better mortgage terms.
Another reason people switch is that they're unhappy with their current lender. It happens all the time.
What happens when I switch my mortgage?
Essentially the new lender transfers over your current mortgage balance and the remaining amortization period on that mortgage. If you’re outstanding balance is $95,256 and the remaining amortization period is 21 years, then that’s what the new lender transfers over. Your new mortgage payments are then based on these numbers and the interest rate offered.
When I switch, can I refinance at the same time?
Short answer is yes. Without incurring fees, some lenders will permit you to refinance to the original mortgage amount while others have limits of between $1,000 and $4,000. You also have the option of doing a switch with a total refinance but you will be subject to fees similar to that incurred with registering a new mortgage.
What are the costs to switch my mortgage?
If all you are doing is switching your mortgage to another lender then you should not be subject to any fees or payout penalties. Now, as I mentioned, if you decide that you want to switch and increase your mortgage amount or lengthen the amortization period, then the mortgage would have to be re-registered. If that’s the case, you would likely be subject to legal fees, appraisal fees etc.
Can any mortgage be switched?
Most mortgages can be switched, however, there’s another mortgage out there that’s a bit different. Some lenders are registering mortgages as a collateral charge which provides for a fixed payment portion and a re-advanceable line of credit portion.
While it’s a great mortgage product, it cannot be switched from one lender to another. To move your mortgage in this case, you’ll have to re-register the whole thing.
How long before my mortgage is up should I start the switch process?
You should think about switching your mortgage between 90 and 120 days before your renewal. This gives ample time to complete the process.