The Real Deal about Transfers and Switches.
Most people who are thinking about a transfer or switch want to take advantage of a lower interest rate or to get a new mortgage product with terms that better suits their needs.
Up for Renewal?
If your mortgage is approaching renewal and you are considering a transfer or switch – great news! You won’t be charged a penalty. BUT you are still required to qualify at the current qualifying rate and need to consider potential costs around legal charges, appraisal fees and penalty fees (if applicable). In some cases, the lender will offer you the option to include these fees in your mortgage or even cover the costs for you.
Currently have a Collateral Charge Mortgage?
If you have a collateral charge mortgage (which secures your loan against collateral such as the property), these loans cannot be switched; they can only be registered or discharged. This means you would need to discharge the mortgage from your current lender (and pay any fees associated) before registering it with a new lender (and pay any fees associated).
Still locked into your Mortgage?
If you’re considering a transfer or switch in the middle of your mortgage term, you will likely incur a penalty for breaking that mortgage. Typically, transfers and switches are done to take advantage of a lower interest rate (and lower monthly payments), but you want to be confident that the penalty doesn’t outweigh the potential savings before moving ahead.
Things to consider for a transfer or switch:
- You may be required to pay fees associated with the transfer or switch, including possible admin and legal fees.
- You will need to requalify under the qualifying rate to show that you can carry the mortgage with the new lender.
- You will be required to submit documents that may include, but are not limited to, the following (depending on the lender):
- Application and credit bureau
- Verification of income and employment
- Renewal or annual statement indicating mortgage number
- Pre-Authorized Payment form accompanied by VOID cheque
- Signed commitment
- Confirmation of fire insurance is required
- If LTV is above 80%, confirmation of valid CMHC, Sagen or Canada Guaranty insurance is required
- Payout authorization form
- Property tax bill
If your mortgage is currently up for renewal, consider reaching out to your DLC Mortgage Expert. Not only can they advise you of any penalties or fees that may be associated with your desired transfer or switch, but they also have the knowledge and ability to shop the market for you to find the best options to meet your needs. This extensive network of lender options allows brokers to ensure that you are not only getting the sharpest rate, but that the mortgage product and terms are suitable for you now – and in the future.
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