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Writer's pictureKomal Vij

Looking to Switch Your Mortgage? Factors to Consider

Updated: Oct 26, 2023

Mortgage switching can offer numerous benefits, but it's crucial to carefully evaluate your specific circumstances to determine if mortgage switching is the right choice for you.

Thinking about Switching Your Mortgage?
Want to explore better mortgage options? Consider switching your mortgage!

Your mortgage is up for a renewal & you may have a few questions.

  • Should you renegotiate with your current lender?

  • Switch mortgage lenders?

  • Stick with the same lender & same type of mortgage?

The point is, you have options and its important to evaluate them. Let's go through the key things you should know when switching your mortgage to make an informed decision that align with your financial goals.

Switching your mortgage in Canada is a significant financial decision that can have a profound impact on your long-term financial stability. Whether you're looking to secure a better interest rate, change the terms of your mortgage, or simply explore your options, it's essential to understand the ins and outs of the process.


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Switching your mortgage in Canada can offer several benefits, depending on your financial goals and circumstances.

Understand the Reasons for Switching

Before you embark on the journey of switching your mortgage, it's crucial to have a clear understanding of why you want to make the change.


Common reasons for mortgage switching include:

a. Lower Interest Rates: Many homeowners switch to take advantage of lower interest rates, which can result in significant savings over the life of the mortgage.

b. Changing Mortgage Terms: You may want to switch to a different mortgage term, such as transitioning from a variable rate to a fixed rate, or vice versa, to better suit your financial situation.

c. Access Home Equity: Switching your mortgage can allow you to tap into your home equity for important financial goals, such as home renovations, debt consolidation, or investment opportunities.

d. Consolidating Debt: If you have high-interest debt, you can consolidate it into your mortgage to benefit from lower interest rates and simplified payments.

e. Lender Dissatisfaction: If you're unhappy with your current lender's service or terms, switching your mortgage can offer an opportunity to find a better fit.

f. Interest Rate Fluctuation: Interest rates play a pivotal role in your mortgage's overall cost. If you foresee interest rates increasing in the future and want to secure a fixed rate for budgetary stability, transitioning from a variable-rate to a fixed-rate mortgage can be a prudent move.

g. Financial Goals: Your financial circumstances may have evolved since you first took out your mortgage. If you are now in a better position to pay off your mortgage more quickly, you might consider switching to a shorter amortization period or a mortgage type with more favorable prepayment options.

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Before you think of switching your mortgage, it's crucial to understand the your reasons for this change.

Know the Costs Involved

Switching your mortgage in Canada isn't free. There are several costs associated with the process, which may include:

a. Mortgage Prepayment Penalty: If you're breaking your existing mortgage term before it matures, your lender may impose a prepayment penalty. This penalty can vary significantly and depends on factors like the remaining term and the type of mortgage you have.

b. Legal Fees: You'll need a lawyer or notary to handle the legal aspects of your mortgage switch, such as transferring the title and preparing the new mortgage agreement.

c. Appraisal Fees: In some cases, your lender may require an appraisal of your property to determine its current market value.

d. Discharge Fee: There may be fees associated with discharging your old mortgage and registering the new one.


Some lenders may waive or cover the cost of some of these as an incentive to have you make the switch. They might also offer flexibility such as increasing monthly prepayments, making extra payments or paying your mortgage off early, which can save a lot of money in interest over the long term. So, it’s good to research all these options and to speak with your mortgage broker to help you crunch the numbers.

It's essential to assess your financial situation, shop around for the best deals, and be aware of any potential costs involved.
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Shop Around for the Right Mortgage

When switching your mortgage, it's essential to shop around for the best deal. Don't settle for the first offer that comes your way. Consider working with a mortgage broker who can help you explore various lenders and mortgage products to find the one that best suits your needs. Compare interest rates, terms, and fees to make an informed decision.


Mortgage Term Considerations

The term of your mortgage is a crucial aspect to consider when switching. Here are some points to keep in mind:

a. Fixed vs. Variable Rates: Decide whether you want a fixed-rate mortgage, which offers stability with consistent payments, or a variable-rate mortgage, which can fluctuate with market conditions.

b. Short-Term vs. Long-Term: Short-term mortgages typically have lower interest rates but require more frequent renewals, while long-term mortgages offer rate stability but may have higher rates.

c. Amortization Period: Consider the length of time it will take to pay off your mortgage. A shorter amortization period means higher monthly payments but less interest paid over the long term.


Mortgage Penalties and Restrictions

Understanding the penalties and restrictions associated with your current mortgage is crucial. Review your existing mortgage agreement to check for any prepayment penalties or restrictions on switching. It's also essential to know if your current lender allows porting your mortgage, which can be useful if you're moving to a new home.

Qualifying for a New Mortgage

To switch your mortgage, you'll need to qualify for a new one with mortgage stress test. Lenders will assess your credit score, debt-to-income ratio, employment stability, and other financial factors. Ensure your finances are in good shape before applying for a new mortgage to improve your chances of approval.

The timing of your mortgage switch can impact the interest rates you're eligible for.

When switching your mortgage, think about your long-term financial goals.

  • How does your new mortgage align with your future plans?

  • Are you planning to pay off your mortgage early?

  • Invest in other opportunities?

  • Save for retirement?


Make sure your mortgage aligns with your broader financial strategy.

Switching your mortgage can save you thousands of dollars and help you to pay down your mortgage faster.

Switching your mortgage in Canada can be a strategic financial move if done thoughtfully. Understanding your reasons for switching, knowing the associated costs, shopping around for the best deal, and considering the mortgage term are all crucial steps in the process. It's essential to be well-informed and seek professional advice when necessary to make the right decisions for your financial future.


kvij@mortgagealliance.com I (780) 233-8500


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