Rates are currently at record lows! Although it’s easier to stick with your existing lender, you may be able to save thousands of dollars by switching your mortgage to another lender to take advance of preferred rates and features. I’m going to share with you, step-by-step, how to do this:
1. Check when your mortgage matures
Generally, a standard mortgage will have a maturity date of within 5 years and on that specific day, you have the option to take your mortgage to another bank without any penalty. When you have less than 4 months until the maturity date, that’s the best time to inquire on different rates and options.
The trend is if your mortgage amount is more than 80% OR less than 70% of the market value of your property, chances are you will receive a much more competitive offer than your existing bank. The reason is cuz the types of mortgage are often backed up by the Canadian government. And in the eyes of other banks and lenders, your mortgage is considered low risk.
And how about those who are paying a higher rate but the mortgage maturity date is still in a couple of years?
Well, you can still consider switching your mortgage to get a lower rate but it’s important to connect with your existing bank and ask what your penalty will be for breaking the term. Generally, if you’re in a variable rate mortgage, your penalty is capped at 3 months interest. But if you’re in a fixed rate mortgage, expect your penalty to be much higher.
Once we know what your penalty is, then we can run the numbers to see if it’s worthwhile to still switch even though you’ll need to pay a penalty.
After discussing different rates and options and if switching works out better for you,
2. Mortgage application
Although you’ve had this mortgage for a few years, when you’re moving your mortgage to another lender, this new lender views it as a brand new mortgage. Therefore, you’ll need to be qualified at the current mortgage rates and policies, and financial situation. Documents that we’ll need are your employment documents like employment letter and pay stubs, mortgage statement, and property tax statement
It usually takes about 3-5 business days for the lender to decide whether or not you are approved and what conditions are required.
Once you’ve got the approval, then we go onto the last step.
3. Make It Official.
A solicitor will be required to facilitate the switch and update the title registration. Your bank will be notified to provide a Payout Statement and it’ll show the final balance owing in order to pay them out. Once the final amount is set and paperwork is signed, then your solicitor will be in charge of directing the funds from your new lender to payout your previous mortgage.
And there you go! We just went over how to switch your mortgage to another lender to take advantage of mortgage terms and rates. If you'd like to learn more about how you can do this, feel free to contact us and we'd love to help!