Should I switch my mortgage?
There are several reasons why you might want to switch your mortgage. Maybe you want a better rate than the one you’ve got, or maybe the mortgage you have isn’t flexible enough and you want increased prepayment privileges or a different payment schedule.
When your mortgage comes up for renewal, you have a perfect opportunity to re-evaluate and switch to something better.
So how do I switch my mortgage?
You’ve decided to switch? Awesome. Now, pick the mortgage you want and submit an application. You’ll also need to hand over:
- A copy of the mortgage renewal letter from your current lender
- Proof that your property taxes are paid and up to date
- Confirmation of income, like a pay stub or letter from your employer
- Proof of property insurance
After the new lender gives you their stamp of approval, they request a payout statement from your old lender. This statement includes the outstanding mortgage amount as of your renewal date. This amount is now the total of your mortgage with the new lender.
The last step in switching your mortgage is to pay any outstanding fees to your new lender. After that, they’ll pay out your mortgage with the old lender, and issue you a new one.
Stuff you need to remember
- You can’t change your mortgage amount or amortization period when you switch providers. If you want to do that, talk to your new lender about refinancing.
- Costs you incur from switching lenders (up to $3,000) can be added to your mortgage and amortized, rather than paid out in full.
- If you switch providers before your mortgage term ends, you have to break your mortgage term and pay a prepayment penalty to your current lender.
- Private and collateral mortgages are not eligible for switching.
Is switching worth it?
Don’t get cold feet now! Switching can seem like a hassle but it can really pay off. Even switching to a mortgage with a slightly lower interest rate can make a big difference. Here, we’ll use an example so you can see how it all adds up.
Say you have $400,000 to pay off. You can renew your existing fixed rate mortgage at 3.30% for a 5-year term or switch to a different provider with a fixed rate mortgage at 2.80% for a 5-year term. Let’s crunch some numbers.
3.30% for a 5-year term = $1,955.09 monthly payment
2.80% for a 5-year term = $1,852.17 monthly payment
That might not seem like a big enough difference to bother with switching your mortgage, but look at it over 5 years:
3.30% for a 5-year term = $61,152 in interest
2.80% for a 5-year term = $51,705 in interest
That’s a difference of $9,447!*
How much does it cost to switch my mortgage?
The exact amount will depend on the lender, but here are the types of fees you usually pay:
- Appraisal fee to verify your property’s value
- Assignment fee to transfer the mortgage from the old lender to the new lender
- Discharge fee to discharge the old mortgage and register the new mortgage
- Legal fees for your lawyer to sign the new mortgage agreement
Don’t let fees put you off, though. Lenders are keen for you to switch, so they often offer to pay some or all of these fees.
Great reasons to switch to motusbank
Like 2.49% for a 5-year fixed-rate closed mortgage, or 2.49% for a 5-year high ratio fixed-rate mortgage.
20/20 prepayment privileges
You can pay down up to 20% of the original principal every year or increase your payments by 20% – without penalty!
Skip one month’s mortgage payment to get some extra breathing room when the unexpected happens.
Get a payment schedule that fits your life and budget: weekly, bi-weekly, monthly, bi-monthly, or accelerated weekly or bi-weekly.
Our Group Mortgage Protection (GMP) helps safeguard your home in case of financial hardships like death, disability or critical illness.
Learn more about motusbank mortgages
*Calculations are for illustrative purposes only and assume no other costs. Rates subject to change at any time.