Your mortgage is coming up for renewal. Don’t be too hasty in just signing the form and sending it back to your lender! Many mortgage holders do just that, and the usual result is a higher rate and a mortgage product that might not be best suited to what they need. If you’re wanting to renew/switch your mortgage to another lender who will almost alway give you a better rate. Most lenders now offer “no cost or low cost switches” which result in a process that cost you $0. To best prepare for your upcoming mortgage renewal, here are the questions you should be asking yourself before you sign on the dotted line:

  • Should I take a VRM (Variable Rate Mortgage) or a Fixed Rate Mortgage? Let’s spend a few minutes reviewing market trends so that you can make an educated decision.
  • Do you have any unsecured debt that you are paying higher interest rates on (i.e. credit cards, line of credit, auto loan)? This could potentially be added to your mortgage if needed.
  • Do you have any plans to renovate or improve your property? If so, we may be able to increase your mortgage to cover these costs.
  • Are your payments ok? Would you like them to be lower/higher?
  • Do you need a new vehicle? Financing a vehicle with your home equity will most often provide you with a lower rate and lower payments.
  • In the next 5 years will you need access to home equity for anything? Do you plan to invest, purchase another property, help kids with school, etc.?
  • Are you considering buying a rental or vacation property? Your current mortgage lender may not provide the product that will allow you to do this with ease and simplicity.
  • Are you planning to move? If so, the product you choose for your next term can impact your ability to Port your mortgage to another property and may also result in higher costs.
  • Are there any other concerns that you have?

What happens legally when you switch?

Most people are unaware of the legal effect of switching lenders. When you renew your mortgage you are essentially starting a whole new term (not to be confused with the term amortization which determine what your payments will be) and discharging the existing mortgage, taking out a new one, and beginning the whole payment process, albeit at a lower principal amount. As such, you should treat this as just as important a process as the first time you arranged the mortgage. Remember your situation will most likely have changed since then, and you may require a different product with different terms attached to suit your situation and needs.

In most provinces a switch of the current or lower balance requires only a simple assignment of interest in the mortgage to be executed by all parties and registered on title. This assignment also attaches the specific terms that will have legal effect, and replaces those of the transferring institution. So even though the old mortgage is still registered on title, all those old terms and conditions registered by your previous lender will be completely replaced by those of your new lender under the assignment of interest.

Moreover, the form that you are holding in your hand from the lender who did your previous mortgage financing has a rate that probably is not as competitive as it could be. Don’t let the hassle from the first time you negotiated lead you to just signing the form and sending it back to the lender – it will most probably cost you in the form of higher rates.

The lenders count on renewers just signing the form and mailing it in – they are not forcing you – but they are preying on human nature to embrace convenience. However, let us do the work for you – the same convenience, at a much lower cost to you and a product and terms that will suit your current situation. The fact is that it is likely another lender will give you what you want at a rate you want – there are no legal implications to you switching.

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