Posted On Aug 20, 2024

(Edited September 30, 2024)

When your mortgage term ends in Canada, you face a decision: renew with your current lender or switch to a new one. While renewing with your existing lender may seem simpler, switching lenders can offer significant financial benefits and more flexible options.

Here’s why you should consider making the switch:

  1. Better Interest Rates The most compelling reason to switch is the potential to secure a lower interest rate. Even a slight rate reduction can translate into significant savings over the term of your mortgage. For instance, on a $500,000 mortgage with a 25-year amortization, reducing your interest rate from 5.0% to 4.5% could save you around $140 per month, adding up to approximately $1,680 more in your pocket per year. Over a five-year term, that’s a saving of over $12,000 in interest costs.

  2. Restructure Your Mortgage Switching lenders also provides an opportunity to restructure your mortgage according to your current financial goals. This could include extending your amortization period back to its original length, significantly reducing your monthly payments and improving your cash flow, which is especially beneficial in times of high debt levels and rising interest rates.

  3. Incentives from New Lenders Many lenders are eager to attract new customers and may offer various incentives to encourage you to switch. These can include cashback offers to cover transfer fees and penalties, or even covering the costs of legal fees and appraisals, making the switch more financially viable.

  1. Superior Mortgage Products Different lenders offer varied mortgage products with features that may better suit your current needs. Shopping around gives you a chance to find a mortgage product that fits your financial situation better than your current one.

  2. Enhanced Customer Service The quality of customer service can vary significantly between lenders. If you’ve experienced service issues or if your current terms are no longer competitive, looking for a new lender can also mean finding one with better service and more responsive customer support.

  3. Consider Debt Consolidation at Renewal Renewal time is an opportunity to consider consolidating your debts. This often involves adding to your mortgage, which requires going through the approval process again, even with your current lender. Since you must undergo this process anyway, it’s a good time to explore which lender can now best meet your refinancing needs.

  4. Streamlined Mortgage Processes Contrary to common perception, mortgage processes have evolved and become more streamlined thanks to technology. The advent of online applications and digital verification has made comparing offers and applying for new mortgages much easier.

  5. (As of November 21'24) Exemption from the Stress Test Homeowners can switch lenders at renewal without undergoing the stress test, which reduces barriers for borrowers who were previously concerned about qualifying under stringent conditions.   This change can improve options for borrowers by providing access to better rates and terms from other lenders without the worry of stress test qualification. It makes switching at renewal even more attractive.

Conclusion 

Renewing your mortgage with your existing lender might seem to be the path of least resistance, but it’s not always the most advantageous. Switching lenders when your mortgage matures can lead to better interest rates, more favorable terms, and incentives that make switching worthwhile. It’s essential to weigh the costs of switching against the potential benefits and consider your financial goals and needs before making a decision. Always consult with a Mortgage Agent to explore your options and ensure that you make the best choice for your financial future.

 

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