RENEWING YOUR MORTGAGE
You’ve heard about the switch mortgage and know that it means moving your mortgage to another lender but perhaps you don’t quite have a complete understanding of the whole story.
I believe 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.
To begin with, 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 search our portfolio of lenders for a better deal for you.
Lenders in general make very good money with renewals when people just sign the renewal and send it back. Remember, there’s no cost or obligation to explore your options and have us take a look.
Frequently Asked Questions
WHY 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.
CAN I SWITCH AND 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 WILL IT COST TO SWITCH MY MORTGAGE?
If all you’re 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.
WHAT’S INVOLVED IN SWITCHING A MORTGAGE?
Switching a mortgage is pretty simple, all you have to do is provide us with your form B and a recent mortgage statement from your current lender. The form B is a form you would have received along with your legal documents when you first received your mortgage. You will also be required to fill out a mortgage application.
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 SOON BEFORE MY MORTGAGE IS UP SHOULD I START THE SWITCHING PROCESS?
You should think about switching your mortgage between 90 and 120 days before your renewal. This gives you ample time to complete the process.
In the right circumstances, switching your mortgage can be very beneficial, however sometimes it pays to stick with your current lender.
All it takes to find out what’s best is to have one of our mortgage specialists review your current situation. If we find a better deal, we’ll let you know. We’ll also let you know if it’s best to stay with your current lender.
WHAT ARE THE LEGAL ASPECTS OF SWITCHING LENDERS?
Most people are unaware of the legal effect of switching lenders. When you renew a mortgage you are essentially starting the process again ie. discharging the existing mortgage, taking out a new one, and beginning the whole payment process over, albeit at a lower principal amount. As such, you should treat this as just as important a process as the first time you arranged the mortgage. Remember your situation will most likely have changed since then, and you may require a different product with different terms attached to suit your situation.
In most Provinces a switch of the current or lower balance requires only a simple assignment of interest in the mortgage to be executed by all parties and registered on title. This assignment also attaches the specific terms that will have legal effect, and replaces those of the transferring institution. So even though the old mortgage is still registered on title, all those old terms and conditions registered by your previous lender will be completely replaced by those of your new lender under the assignment of interest.
Moreover, the form that you are holding in your hand from the lender who did your previous mortgage financing, has a rate that probably is not as competitive as it could be. Don’t let the hassle from the first time you negotiated dictate you just signing the form and sending it back to the lender — it will probably cost you in the form of higher rates.
The lenders count on 70% of mortgagees just signing the renewal form and mailing it in — they are not forcing you — but they are preying on human nature to embrace convenience. However, let us do the work for you — the same convenience, at a much lower cost to you and a product and terms that will suit your current situation. The fact is that it is likely another lender will give you what you want at a rate you want — and there are no legal implications to you switching.