When your mortgage term comes up for renewal, you’ll have the option to switch mortgage providers or stay with your current lender. While switching mortgage providers may be the obvious choice, it’s still wise to learn more about what the process entails, what fees you’ll encounter and what you need to consider before making any big financial decisions.

Reasons to Switch Mortgage Providers

When mortgage interest rates are low, you may be able to take advantage by making some changes to your mortgage, including switching lenders. Making the decision to switch mortgage providers at the right time can save you thousands of dollars in interest and help you pay off your mortgage faster, which is the ultimate goal.

Typically there are two main reasons why you’d want to switch mortgage providers:

1. You’re looking for better terms and conditions
Taking a close look at your current terms and conditions will help you notice any gaps or highlight any concerns you may want to address with a new lender. One of the most important terms and conditions you’ll want to consider is the prepayment options with your current mortgage provider and how they differ from others. If a new lender can offer you better prepayment options than your current provider, making the choice to switch could help you pay down your mortgage faster and save you from being penalized when you choose to do so.

To put this into perspective, most lenders will allow you to increase your monthly mortgage payment amount once in a calendar year. The catch is that the amount they’ll allow you to increase it by varies, so it’s important to ask about this in advance.

2. You’re looking for a better mortgage rate
If a new lender can offer you a better mortgage rate than your current one, making the switch could save you thousands of dollars in interest over time. Just make sure you do your homework instead of accepting your current lender’s first offer for renewal as there are a few factors to consider when it comes to calculating how much interest you’ll pay over the course of time. How long your term is and whether it’s fixed or variable will be important to note alongside the actual rate provided. Calculate how much you’ll pay in interest over the course of your term so you can ensure your final choice is the one that saves you the most money by the time it ends.

How Much Does it Cost to Switch Mortgage Providers

Switching mortgage providers isn’t as simple as moving your investment elsewhere. You’ll be required to pay a few different fees in order to ensure everything is processed and managed properly by both parties involved. Look into the specifics of these costs with your lender(s) so you can be prepared in advance should you choose to switch.

Mortgage Discharge Fee
To end your current mortgage agreement, your lender could charge you up to $400. If your lender is a bank, then this fee should be outlined in your contract so you can look into that in advance.

Appraisal Fee
In order to verify the value of the mortgaged property, it needs to be appraised. This typically costs anywhere from $150-$500 and is still required even though you would have originally paid for an appraisal fee when you first bought your home.

Assignment fee
This fee simply covers the cost of moving your mortgage from one lender to another and can range from as little as $25 to upwards of $330 depending on your lenders terms.

Legal fee
You’ll require lawyers to draft up your contract and complete any legal paperwork so you’ll need to pay them for their services. This cost will vary depending on the type of mortgage you have and how much work is required to perform the switch from a legal standpoint but using a ballpark of $1500 should cover you for budgeting purposes.

How to Switch Mortgage Providers

If you’re considering making a switch, understanding what you’ll need to do is a great first step. The process of switching mortgage providers can be broken down into a few simple steps:

Find The Best Rates
Start looking at rates and terms from other lenders so you can compare them all and determine which one has the lowest rates and most repayment flexibility. You can do this manually or seek out tools/professionals to assist with this process.

Submit A Mortgage Application
Once you’ve found your ideal mortgage providers, you’ll have to submit a formal application along with your credit score records for assessment. You can expect to require a copy of your mortgage renewal letter from your existing lender, a property tax bill, proof of property insurance and proof of employment/income.

In order for the lender to ensure you’re a responsible borrower, they’ll also perform a credit check before you can move to the next phase of accepting the terms and conditions. Being that hard credit checks have a negative impact on your credit score, it’s always wise to be selective about where you apply and try to cluster your applications within a short period of time so they count towards one hard check instead of individual checks.

Wait For Your Payout Statement
In order to perform the switch, your current lender will have to provide you with a payout statement that includes how much you still owe on your mortgage, your renewal date and any other important information pertaining to the mortgage itself. Your new lender will require this statement in order to finalize the switch.

Pay Any Outstanding Fees
The very last step in the process of switching mortgage providers involves you paying off any outstanding fees on your mortgage to your new lender so they can settle up with the current lender before issuing you a new mortgage. These costs are outlined in the section above so be sure to plan for them as part of this process.

If you feel like you need to switch mortgage providers to access better rates, unlock more flexible terms or just find someone who better suits to your needs, there is a process you can expect to encounter. Understanding how switching mortgages works, what fees you can expect, how to compare options and what is required of you will make this process seem a lot less daunting. The first step is looking into your options so if your renewal is approaching, make some time to research other lenders to see if you can find a better fit. Want to learn more about your mortgage and financing options? Connect with our team of experts who can help you pursue your goals confidently.