When your mortgage term comes to an end, you may be faced with the question: should I stay with my current lender, or should I explore other options?
This decision is often referred to as a "switch," and understanding what it entails can help you make the best choice for your financial future.
What is a switch?
A switch, in the context of mortgages, is when you transfer your mortgage from one lender to another at the end of its term. This may be an opportunity to potentially secure a better interest rate, access more flexible terms, or find a lender that better suits your changing needs.
Unlike refinancing, a switch typically doesn’t involve borrowing additional money; it’s simply moving your existing mortgage balance from one lender to another.
Do I have to renew with my current lender?
The short answer is no. You are not obligated to renew your mortgage with your current lender. In fact, many homeowners don’t realize that they have the option to switch lenders when their mortgage term is up. This is a crucial time to reassess your mortgage, explore other offers, and ensure you’re getting the best deal possible.
Your current lender will likely reach out to you a few months before your renewal date with a renewal offer. Many mortgage holders make the mistake of simply signing this offer without having a mortgage broker review options for you, which could be very costly. The most-savvy mortgage holders lean on their mortgage broker to review their mortgage at each renewal or even yearly to see if the broker can find better rates or options. This could result in you paying off your mortgage faster and saving thousands of dollars over the life of your mortgage.
Benefits of switching lenders
Switching lenders at renewal can be a strategic move for several reasons:
- Better interest rates: Interest rates can fluctuate over time, and another lender might offer a lower rate that reduces your monthly payments or allows you to pay off your mortgage faster.
- Flexible terms: You may find a lender that offers terms more aligned with your current financial situation, such as the ability to make lump-sum payments or increase your regular payment amounts without penalty.
- Enhanced customer service: If you’ve been unhappy with the service from your current lender, switching gives you the chance to work with a lender who prioritizes customer satisfaction and support.
- Incentives: Some lenders offer special incentives, such as covering the cost of appraisal or legal fees, to attract new customers during a switch.
Considerations before switching
Before making the switch, there are a few factors to consider:
- Fees and penalties: Some lenders may charge fees for switching, such as discharge fees or penalties for breaking your existing mortgage early. Ensure you understand any costs involved.
- Pre-approval: Just as when you first obtained your mortgage, you’ll need to qualify for a new mortgage with the new lender. Make sure you meet the new lender’s requirements before making a decision.
- Timing: Start shopping around for new mortgage options well before your renewal date. This will give you enough time to compare offers and negotiate the best deal.
Your mortgage renewal is a crucial moment—don’t settle for less. Contact me today to explore your options and see if switching lenders could save you money. Let’s find the best mortgage solution together.