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Mortgage Switch Vs Mortgage Renewal: What’s the Difference

When you first get a mortgage, the repayment period is typically 25 years, and the mortgage interest rate is five years. This means that if you make the minimum mortgage payment, the mortgage will renew four times (every five years), and you will have no mortgage left by the end of 25 years.

Like clockwork, you will receive a mortgage renewal offer from your lender about five months before your mortgage is due (the end of the term). 

Mortgage switch and renewal are often used interchangeably, but they mean the same thing. Your mortgage will always renew whether or not you change lenders. The main difference is that it is a switch if you choose another lender. 

You don’t have to wait until the due date to get a lower mortgage rate. Technically, you can renew or switch lenders at any time. However, if you switch your mortgage at the early renewal period, your lender will charge you an upfront penalty. 

Why do you need to Switch Lenders?

People usually change lenders to get better interest rates. If interest rates have dropped sharply since you received your mortgage, it may make sense to switch mortgages before the term ends. Lower interest rates can save a lot of money over the life of your mortgage and are easier to assess. However, switching mortgages before the term ends to get a better interest rate means you’ll need to factor in all possible costs/penalties to estimate your savings correctly.  

How to Make the Process Cost-effective?

A proven way to get lower rates on a renewal is to research rates you can get elsewhere. This is easy if you have the right resources to monitor prices and take advantage of market offers. Rate monitoring can be done manually, but I think it’s better to use your time wisely.

There are some ways to outsource rate monitoring to an agent or technology. 

  • If you work with a mortgage broker like Turnedaway.ca having current mortgage details, you may be notified when deals become available.  
  • Calculate the net benefits of switching (including penalties) and make sure that interest rates are low enough to justify switching. 

Taking advantage of market offers means not accepting offers from lenders without doing research first. 

How do I Switch Lenders? 

What if the lender doesn’t cover the offer? Maybe it’s time to change. From start to finish, once all the paperwork is in place, you can get your mortgage approval within a week and no more than an hour or two. Considering 0.25% to 0.50% savings on mortgage interest, the average mortgage will be $60 to $120 per month over five years.

Here’s what you need to do: 

  1. Confirmation of penalties (if any) 
  2. Make sure you are qualified 
  3. Get mortgage approval 
  4. Save money (maybe) for contract costs 
  5. Renew mortgage 

The Bottom Line:

Is your mortgage due for renewal, or do you want to switch lenders? If your mortgage interest rate is high, your renewal application has been rejected, or you want to review your options, we can help you solve the problems! 

Turnedaway.ca has helped clients improve their financial health for over 30 years. Whatever the reasons for denial, if you want to switch mortgages before the term ends, Turnedaway.ca can be your first choice.

Ajeet Sharma, the founder of Financegab and a well-known name in the field of financial blogging. Blogging since 2017, he has the expertise and excellent knowledge about personal finance. Financegab is all about personal finance which aims to create awareness among people about personal finance and help them to make smart, well-informed financial decisions.


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