Blue Pearl Mortgage Blog

Switch gears on your mortgage

July 17, 2018| Posted by: Blue Pearl Mortgage Group

As a homeowner, there will come a time when you will need to renew your mortgage term until your mortgage is paid off. This is an ideal time to review your mortgage rate, terms and conditions and decide whether they are in line with your current financial situation. If you simply want to renew your mortgage without changing anything except the terms and interest rate, a SWITCH option could be ideal for you.

Wait....it gets better! Many people think that a SWITCH is only when the mortgage is up for renewal, keep reading to learn how you can SWITCH anytime.

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What does a SWITCH mean?

Simply put, when your mortgage comes up for renewal, you have the option to stay with your current lender, or SWITCH lenders and take your mortgage to a new lender. 

Many people think that a SWITCH is only when the mortgage is up for renewal, however did you know that you may be able to switch at any time as we have many lenders that will capitalize up to $3,000 of your penalty into the mortgage as well as cover your legal fees. 

Keep in mind, just as with a mortgage renewal, you can perform a SWITCH if you are not adding to the loan amount of your mortgage. If you are looking to consolidate debt, access equity or increase your mortgage amount, then you must refinance your mortgage.

The impact of the stress test is being felt across Canada

A recent report by Mortgage Professionals Canada states that since the OSFI rules came into effect, homebuyers are having to downsize their borrowing by as much as 20% compared to the same time period in 2017. No matter where your finances stand, 20% less of a mortgage loan is still significant enough to potentially prevent you from purchasing the home you would like.

Here are two reasons to switch lenders:

  1. Obtain a lower mortgage rate

If another lender can offer you a lower mortgage rate than what your current mortgage lender, switching would save you from having to pay thousands of dollars in interest charges.

Here's an example of how you could save:
Your home is worth $450,000 with $300,000 mortgage amortized over 25 years and your current lender offers you a renewal interest rate of 3.85% with a monthly payment of $1,672.66.

Another lender offers you a 5-year term at a fixed rate of 2.95%. If you make the SWITCH, your new monthly mortgage payment will be $1,498.54 reducing your monthly payments and the interest you would pay over the term of your new mortgage.

  1. Get better terms and conditions

Prepayment options, portability, lump-sum payments, skip-a-payment, early-option penalties are some examples of conditions and terms that are part of your mortgage. For example, suppose your current lender only allows you a once a year 5% lump-sum option but another lender with the same rate can offer you a 10% prepayment option. Paying down a larger lump sum to your mortgage will allow you to reduce your principle and pay down your mortgage faster

The bottom line is that with rates still relatively low, it is worthwhile to your bottom line to review your current mortgage to determine if you’re in a position to consider switching. How do you make the switch? The first step is to call our team and we will give you multiple scenarios that will help you determine your best options. We even have access to a lender now who is offering a No-Fee Collateral Switch Program! It's your money. It's your life.

* Subject to each individual lenders lending criteria and fees.

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