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Should You Switch Mortgage Providers in Canada? Here’s How to Know If It’s Worth It
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Thinking of Changing Your Mortgage Provider? Here’s What to Know First
Let’s say your mortgage term is almost up and your lender sends you a renewal offer. The rate looks… okay-ish, but you’ve heard your neighbour just locked in something way lower. Should you stay loyal to your current lender or start shopping around?
You’re not alone in this dilemma. Thousands of Canadians face this decision every year, and the truth is — switching mortgage providers can save you serious money. But there’s a process, and yes, there might be costs involved. The real question is: will the savings outweigh the switching fees?
In this guide, we’ll walk you through the reasons to switch, how it works, what fees to expect, and how to decide if it’s the right move for your finances.
Why Do People Switch Mortgage Providers in Canada?
One of the biggest motivations to switch lenders is simple — a lower interest rate. Even a small rate reduction can mean saving thousands over your next term. It’s not just about the monthly payment; it’s about reducing how much interest you pay over time and putting more money toward your actual mortgage balance.
Another big reason? Better terms and flexibility. Maybe your current lender is stingy with prepayment options. If you suddenly come into extra cash — like a bonus or inheritance — and want to throw a chunk of it onto your mortgage, you might find yourself blocked or penalized. A new lender with better prepayment privileges could help you save years off your mortgage.
Some people also switch providers for better customer service, simpler online tools, or to consolidate other debts under a new mortgage with friendlier rules.
Here’s What You Could Save by Switching
Let’s break it down with a simple example.
Imagine you bought your home five years ago for $500,000 with a 5% down payment and locked in a 2.55% interest rate. Today, you’re renewing with a balance of around $418,500. Your current lender offers you a renewal rate of 5.98%, but you’ve shopped around and found another lender offering 4.89%.
That small rate difference could save you over $21,000 in interest over the next five years. Not only that — your monthly payments would be lower, and you’d knock more off your principal, leaving you in a better position when it’s time to renew again.
Prepayment Options Can Also Be a Game-Changer
Switching to a lender with more generous prepayment options can also lead to massive savings.
Let’s say your current lender only lets you prepay 10% of your balance each year. But another lender allows 20%. If you received a bonus or inheritance and could apply more of that to your mortgage, you’d reduce your amortization — and the interest you’ll pay — dramatically.
Here’s how prepaying a bigger chunk can make a difference over your next 5-year term:
- Prepaying 10% might save you around $6,600 in interest
- Prepaying 15% could save around $9,900
- Prepaying 20% might push that up to over $13,000 — and cut nearly 5.5 years off your mortgage
When you add that to a lower interest rate, switching lenders can be one of the smartest financial decisions you’ll ever make.
How to Switch Mortgage Providers in Canada — Step by Step
Now, let’s talk process. Switching lenders isn’t as complicated as people think — but it’s not instant either. Here’s how it works:
Step 1: Shop Around for a Better Deal
Use comparison tools or speak to a mortgage broker to explore your options. Look at interest rates, prepayment terms, and any fees the new lender might cover for you.
Step 2: Apply Like It’s a New Mortgage
Yes, switching means going through the approval process again. That means you’ll need to provide updated income documents (like pay stubs and T4s), a current mortgage statement, property tax bill, proof of home insurance, and sometimes an appraisal.
Step 3: Work With a Mortgage Pro
If you’re using a broker, they’ll help package your application and explain anything on your credit or employment history that might need clarification. The broker works with the underwriter to make your case and get you the best offer.
Step 4: Get Approved and Review the Offer
Once approved, you’ll receive a mortgage commitment from the new lender. Read it carefully — check the rate, term, amortization, payment frequency, and prepayment privileges.
Step 5: Finalize the Transfer
Depending on how your current mortgage is registered (standard or collateral charge), you may need a notary or lawyer to handle the title work. The new lender will pay out your old mortgage and register the new one in their name.
Are There Fees for Switching Mortgage Providers?
Yes — but they might be worth it. Here are the most common fees you might run into:
Discharge Fee:
This is charged by your current lender to officially discharge your mortgage. It’s typically between $200–$400, depending on your province.
Assignment Fee:
Some lenders charge a fee (up to $395) for transferring the title of the mortgage.
Appraisal Fee:
Your new lender may need a fresh appraisal of your property, especially if it’s uninsured. Expect this to cost between $300–$500, although some lenders will cover it to win your business.
Legal Fees:
If your old mortgage is a collateral charge, you’ll need a lawyer to discharge and register the new mortgage. Legal fees can be around $250 or more, but again — some lenders will cover these costs.
Penalties (if you break your term early):
If you switch before your mortgage term is up, you’ll have to pay a penalty. For variable mortgages, it’s usually 3 months’ interest. For fixed rates, it’s either 3 months’ interest or an interest rate differential (IRD), whichever is higher — and the IRD can get expensive fast.
When Is the Best Time to Switch Mortgage Providers?
The best time to switch is at the end of your mortgage term, when you’re up for renewal. That way, there are no penalties for breaking your mortgage early. You can transfer to a new lender and start your new term fresh — ideally with a better rate and terms.
If you’re thinking of switching before your term ends, you’ll need to compare your potential savings to the penalties you’ll pay. In some rare cases, it still makes sense, especially if interest rates have dropped significantly or your financial needs have changed.
Is Switching Worth the Hassle? Here’s How to Decide
Not sure if switching makes sense for you? Start by asking:
