Looking to switch your mortgage? With interest rates on the rise, it’s worth considering your options. If you shop around, there’s a possibility you might end up saving thousands of dollars. If you are seriously considering a switch, it’s a good idea to keep these four factors in mind:
Watch out for hidden fees
Even if you’ve found a lender willing to offer you a lower interest rate, be mindful of any extra hidden fees - such as these:
- Appraisal Fee ($150-$500): to verify the value of your home.
- Assignment Fee (5-$395): to transfer the mortgage from the old to new lender.
- Discharge Fee (0-$400): to get out of the old mortgage in order to register for a new one.
- Legal Fees (TBD): to pay your lawyer to complete applicable paperwork.
While these fees vary from one lender to the next, it’s important to do your research and ask the right questions before signing on the dotted line.
Get your documents ready
Switching your mortgage lender is like restarting the home buying process all over again. If you recall, that means having a range of documents signed, sealed and delivered. For a switch, you may need some additional information, but these are the main documents required:
- A copy of the mortgage renewal letter from your existing lender
- Most recent property tax bill
- Proof of ownership
- Proof of income with employment letter and pay stubs
Once these documents are received and assessed correctly, you can begin your mortgage switch!
Know your pre-payment terms
A prepayment penalty can be charged by your current lender for a few reasons but one of them is switching lenders. This can cost you up to three months of interest payments on the amount you owe or the interest rate differential. The penalty will depend on your mortgage contract and is typically in place to compensate your lender for lost interest payments. Be sure to check your prepayment terms to understand what your privileges are. Depending on the type of mortgage you have – open or closed – you might have more flexibility in this area.
Consult with experts
The two main reasons most people switch their mortgage is to 1) lock in a lower rate or 2) get better terms and conditions. A great way to find out if this is an option is using a tool like Homewise to assess the mortgage landscape. Our dedicated Mortgage Advisors are able to shop around for you and find a lender that can beat your current rate. Switching is not always straightforward so having an expert’s support is a great way to avoid hidden fees or penalties, help you gather the necessary documents and figure out all the nitty-gritty so you don’t have to.
If you have additional questions about a mortgage switch, be sure to watch this video on the Homewise Mortgage Academy. Once you’re ready to speak with a mortgage expert, apply online with us in just 5 minutes. One of our dedicated advisors will negotiate with over 30 bank and lender partners and help scope out your best mortgage options!
