Switching Your Mortgage Lender at Renewal
Switching lenders at renewal could lower your costs and unlock more favourable mortgage terms. Here’s how to confidently navigate the process.
Updated 
11 min. read
When it comes time to renew your mortgage, you don’t need to stay with your current lender.- Switching lenders could mean access to different rates, terms, or perks.
- The process is common and generally straightforward, especially when you know what to expect.
The end of your mortgage term is quickly approaching. You’ve made your payments on time, your credit is in good shape, and your current lender has just sent you a renewal offer. The question is: do you sign it back, or shop around to find a new lender?
Accepting your existing lender’s renewal offer might seem like the easier option, but switching your mortgage could potentially save you money over the course of your new term.
Key reasons for homeowners to switch their mortgage
Whether you hold a mortgage on a home, condo, or investment property, there are several reasons why you might choose to switch lenders:
Access to different interest rates
One common reason to switch a mortgage is to lock in a better rate. Competing lenders want your business, so they may offer different rates than what your current lender is putting on the table. A mortgage rate that’s even a fraction of a percentage point lower can impact your overall cost of borrowing, depending on your mortgage balance and terms.
Switching from a variable to fixed rate, or vice versa
Do you have a variable interest rate, but you’re concerned about potential rate changes? You might consider switching your mortgage to lock into a fixed rate. Conversely, if you’re currently on a fixed rate, now might be the perfect time to consider switching to a variable rate. Fixed interest rates provide payment stability, while variable interest rates may fluctuate over time.
More flexible payment options
Some lenders offer more options than others when it comes to prepayment privileges, such as allowing for lump-sum payments or accelerated repayments. If flexibility is important to you, you might consider switching to a lender whose features better suit your needs.
Special offers and perks
To incentivize lender switching, competing institutions might also throw in special deals or perks, such as cash back offers, rate guarantees, or fee coverage, subject to eligibility criteria and conditions.
Customer service
A mortgage is a huge responsibility and financial commitment, so it’s crucial that you’re happy with the service you’re getting. If you feel like your current lender isn’t as responsive as you’d like, that may be one reason to make a change.
Potential setbacks when switching a mortgage
While there may be upsides to switching a mortgage, it’s important to also recognize some potential friction points. For example:
- Switching might mean paying legal costs or property appraisal fees.
- Since you typically need to requalify with a new lender, you’ll need to gather and provide your personal, banking, and employment documentation again.
- If you're switching a collateral mortgage, it’ll need to be discharged and re-registered, which might mean higher legal and admin costs.
- If you change your mortgage amount or amortization, you’ll likely need to pass the Canadian mortgage stress test, which checks whether you can afford payments.
The good news is lenders like BMO can help make your mortgage switch as seamless as possible.
The costs of switching mortgage lenders
Switching your mortgage to a different lender may save you money, but there are also costs involved that are crucial to recognize before committing to a mortgage switch. These can include:
Prepayment penalties
If you’re switching mortgages before your current term ends, your current lender may charge a prepayment penalty. For fixed interest rate mortgages, this is often the greater of three months’ interest or the interest rate differential (I R D), which estimates the lender’s lost interest based on current rates. With variable interest rate mortgages, it’s typically just three months’ interest.
Discharge fees
Your current lender may charge an administrative fee to release or discharge your mortgage. Typically, mortgage discharge fees fall anywhere between $0–$400.
Assignment/transfer fees
A new lender might charge an assignment fee to cover the legal and administrative work of transferring or re-registering your mortgage in their name.
Appraisal fees
Even if you’ve lived in your home for years, a new lender might still require an independent property appraisal before approving your mortgage. Although some lenders may expect you to cover this cost, others like BMO will cover appraisal fees for eligible switches.
Legal fees
You may also need to pay a lawyer to handle the title search, fund disbursement, and discharge of your old mortgage. These fees can vary based on your type of mortgage. Fortunately, BMO also covers legal fees for eligible switches.
Incentive repayment
Switching lenders before your term is up may require you to repay a prorated portion of any promotional cash-back offers or broker incentives you might have received when you first took out the mortgage.
How to switch your mortgage
Once you’ve decided you aren’t going to sign back your current lender’s renewal offer, it’s time to start the switching process.
You may choose to do the legwork on your own, but working with a mortgage specialist can make the process much smoother. It may also be more advantageous, since mortgage professionals are equipped to help you explore available options across lenders. Here’s how to get started:
Step 1: Review your finances, compare lenders, and gather all your documents
This first step is best to get started on sooner rather than later, ideally four to six months before your renewal date. Reviewing your finances early ensures you're in a good position to make a switch. Check your credit score, assess any new debts you’ve taken on (car loans, business loans, etc.), and consider other relevant financial details that might affect your ability to qualify.
Next, it’s a good idea to start exploring rates and terms with various lenders. You can look online and compare mortgage rates from banks, credit unions, and other lenders to see what’s out there. Taking the time to weigh all the details now, from interest rates and prepayment penalties to special promotional offers, can help you understand potential options that may save you money down the road.
Once you’ve got a picture of what's out there, it’s wise to gather paperwork relevant to your current mortgage well in advance. Options can change overnight, so you want to be prepared when it comes time to make a move.
Step 2: Submit a formal mortgage application
Once you’ve found a lender and mortgage terms you’re happy with, the next step is submitting a formal mortgage application online, by phone, or in person. No matter the method, you’ll find that the process for applying to switch is very similar to taking out a net-new mortgage, with one extra detail: you’ll also need to provide a payout statement from your current lender.
The payout statement generally confirms your outstanding principal balance, your current rate, and your renewal or maturity date. Your new lender will use it to determine the amount of your new mortgage. Depending on the lender, they will either request it on your behalf or ask you to obtain it directly, which your lawyer can also assist with.
You may also need to provide:
- Government-issued photo ID
- Your latest annual mortgage statement
- Verification of income and employment
- A current property tax statement
Step 3: Complete the application process
Once everything is in order and you’ve submitted your application, your prospective lender will thoroughly review your documentation, assess your credit profile, and may order a property appraisal. From there, there are three possible outcomes: you could receive a rejection, a conditional approval (if you were missing documentation, for example) or, hopefully, a complete approval.
If your new mortgage is approved, congratulations! It’s time to sign all the necessary documents and pay the associated fees. Your new lender will pay out the mortgage to your old lender, and you’ll start your new mortgage term. The lawyer and banks will handle all the necessary arrangements between your old and new lender, so you don’t need to worry about managing the switch or funding process yourself.
Thinking about switching your mortgage to BMO?
The process is generally easy and seamless. Explore whether making the switch could benefit you.
Key decisions and considerations
When deciding whether to switch your mortgage, you’ve got a few major points to consider. Let’s look at some of the most important.
When is the best time to switch?
If your lender is federally regulated, they must send you a renewal offer at least 21 days before your existing mortgage term ends.
It’s often helpful to begin reviewing options earlier as it gives you time to compare lenders and understand potential costs. Cut too close to your renewal date and you might not give new lenders enough time to evaluate your application. Switch too soon, or before your term ends, and you might incur prepayment fees.
That said, if you’re locked into a high interest rate and find a lender offering lower rates, switching before your term is up might make financial sense. Regardless, starting the search four to six months early gives you plenty of time to iron out the details and negotiate.
Should you go for a fixed or variable interest rate?
Just like you did when you first took out your mortgage, you’ll need to decide between a fixed or variable interest rate. In a nutshell, a fixed interest rate remains constant over the life of the term, while a variable rate may fluctuate over time.
| Fixed interest rate | Variable interest rate |
|---|---|
| Predictable costs: A stable rate keeps your borrowing costs consistent and budgeting simple. | Lower starting rate: Variable rates may start lower than fixed rates. |
| Protection from rate hikes: If rates go up, your interest rate is locked in. | Flexibility: The penalties for breaking your mortgage early are typically lower than on fixed-rate mortgages. |
| Stability: Fixed rates can offer certainty, even in volatile markets. | Potential savings: If your interest rate decreases over time, you may pay less in interest compared to a fixed-rate mortgage. |
It’s important to note that even if a fixed interest rate mortgage has a higher interest rate, it may still result in lower overall interest costs compared to a variable interest rate mortgage. Ultimately, the right choice for you depends on your risk tolerance, cash flow, and financial circumstances.
Is your credit score healthy?
Since switching your mortgage means filling out a new mortgage application, potential new lenders will want to assess your credit profile. Your credit profile could impact your ability to qualify and the terms offered.
If your credit profile needs work, you can take steps to improve your credit score by adopting healthy habits like making loan payments on time every month and keeping credit card balances low. Improving your credit score may help expand your options.
Keep in mind that multiple credit inquiries can impact your score, so it’s crucial to be strategic about the lenders you formally apply with.
Are you prepared for the costs?
Switching a mortgage incurs costs that could make or break the decision for you. From home appraisals and legal costs to mortgage discharge fees, things can add up quickly. To help evaluate if switching is truly worth it, you can estimate the total cost, if possible, and compare it against the projected savings.
Wrapping up
At the end of the day, whether you decide to switch mortgage providers is entirely up to you. Many Canadian homeowners have done so to reduce their overall cost of borrowing and improve their terms, but it’s not the best decision for everyone.
So, after evaluating all your options, you might just decide to stick with your existing lender’s renewal offer. If, on the other hand, you do decide to make a switch, BMO makes it easy. Contact us to connect with a mortgage specialist who can help every step of the way. Happy switching!
FAQs about switching a mortgage
The process of switching mortgage lenders typically takes two to six weeks from application to completion. Factors that extend the timeline can include home appraisals, documentation collection delays, title complications, or even busy real estate seasons like spring or fall. Collateral mortgages often take longer as they require a full discharge and re-registration, rather than a simple transfer.
It’s usually too late to switch lenders once your renewal date has passed and a new term has already started—unless you renewed into an open mortgage while you continued to shop around. After a new term has started, switching lenders would mean breaking your mortgage mid-term, which may result in prepayment penalties.
Switching a mortgage means moving your mortgage to a new lender, with the existing mortgage paid out and a new one registered. In contrast, porting typically means transferring your current mortgage to a new property, usually keeping the same terms in place.
Yes. At renewal, you may be able to negotiate new terms with your current lender, depending on your situation and available offers.
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