Top Mistakes to Avoid When Changing Mortgage Lenders at Renewal Time

Mortgage renewals are a great time to reassess your options—but switching lenders can also bring pitfalls if you're not fully informed. While it’s smart to shop around, avoiding a few key missteps can save you money, stress, and delays. Here’s what to watch out for when changing mortgage lenders at renewal time.

1. Waiting Too Long to Start the Process

One of the biggest mistakes homeowners make is waiting until their renewal date is only a few weeks away. By that point, you have little negotiating power and limited time to compare options. Ideally, you should start looking at new lender offers at least 3 to 4 months before your renewal date. This early start gives you time to compare rates, ask questions, and go through the approval process without pressure. It also allows your broker or advisor to negotiate with your current lender, which could help you get a better deal even if you decide not to switch.

2. Ignoring the Fine Print in Your Current Mortgage

Even at renewal, some mortgage contracts include conditions that could affect your ability to move to a new lender. Check your existing agreement for discharge fees, early renewal penalties, or other clauses that might impact your costs. Most of the time, you are free to switch lenders without penalty at the end of your term, but double-checking ensures there are no surprises.

3. Focusing Only on the Interest Rate

A low rate is appealing, but it should not be the only factor you look at. Mortgage features can save or cost you thousands over time. When comparing lenders, look closely at:

• Prepayment privileges – How much can you pay down early without penalty?
• Portability – Can you transfer the mortgage if you move?
• Penalty calculations – How much would it cost if you needed to break the mortgage mid-term?
• Payment flexibility – Can you change your payment frequency or amount easily?

A slightly higher rate with better features could be more valuable than the lowest rate with strict conditions.

4. Skipping Pre-Approval with the New Lender

A common misconception is that switching lenders at renewal is automatic. In reality, your new lender will still need to review your application, including income, debt, and credit history. If you assume approval is guaranteed, you could be caught off guard if your application is delayed or declined. Always get pre-approved before committing to a new lender so you know you qualify and have time to address any issues.

5. Overlooking Fees and Closing Costs

Switching lenders can sometimes involve extra costs such as legal fees, appraisal fees, or discharge costs. These can reduce or even eliminate the savings from a lower interest rate. Ask upfront what the total costs will be. Some lenders cover these fees to attract new clients, while others expect you to pay them. Knowing the numbers ahead of time helps you make a clear decision.

6. Letting Your Current Lender Pressure You

Once you tell your current lender that you’re considering switching, they may suddenly offer you a lower rate or new perks to keep your business. While this can work in your favor, it’s important not to feel pressured. Don’t sign anything on the spot. Take the offer, compare it with what other lenders provide, and only commit once you are confident it’s the best option for your situation.

7. Believing It’s Too Complicated to Switch

Many Canadians renew with the same lender simply because switching sounds like a hassle. In reality, the process is easier than most people expect. A mortgage broker or an online mortgage platform like Homewise can handle the paperwork, negotiate with lenders, and guide you step by step. With the right support, switching can be quick and stress-free.

Final Thoughts

Switching mortgage lenders at renewal can be a smart move, but it only pays off if you do it properly. Start early, read the fine print, compare more than just rates, and don’t let pressure influence your decision. The right preparation can lead to real savings and more flexible mortgage terms that fit your financial goals.

FAQs

1. Is there a penalty for switching mortgage lenders at renewal?

Usually no. At the end of your term, you’re free to switch. Still, it’s important to review your mortgage agreement to confirm there are no hidden clauses.

2. How long does it take to switch mortgage lenders?

The process can take anywhere from a few days to a few weeks. Starting the process at least 3 months before renewal ensures you don’t run out of time.

3. Will switching lenders hurt my credit score?

Your credit will be checked by the new lender, which creates a small inquiry on your report. This typically lowers your score by fewer than five points and has no lasting effect.

4. Can I switch lenders if I have bad credit?

It can be more difficult, but not impossible. A mortgage broker can help connect you with alternative lenders who specialize in situations where traditional lenders may not approve.