Procedure to Switching Mortgage to a New Lender
When there is time for renewal of your mortgage, it is essential to make an adequate research to decide whether you want to stay with your current lender, or switch providers and take your mortgage to a new lender. If any lender is offering you a lower mortgage rate than your current mortgage provider, it prudent to switch mortgage providers as it may save you thousands of dollars in interest charges.
If a new lender offering better terms and conditions than current lender, it may be worth to switch your mortgage over to them. For example, if a new lender is offering better prepayment option, you may get opportunity to pay your loan earlier without any additional interest costs.
Once you have been fortunate in finding a lender who can offer you a better mortgage rate and/or terms and conditions, you will be required to submit a formal mortgage application. New lender required to approve your mortgage application. You also need to submit following documents with application:
- A copy of mortgage renewal letter from your current lender
- A recent mortgage statement from current lender
- Proof of owning your home
- A letter from current employer for income confirmation
- Property insurance proof
- Form B is a form that you would have received with legal documents when you first received your mortgage
Once your mortgage application has been approved, your new lender will ask for a payout statement from your previous lender. This statement carries details of your current mortgage. New lender will use the mortgage amount stated on the payout statement as new mortgage amount with them.
Fees involved in switching mortgage providers
There are certain fees usually in involved in switching mortgage process such as:
- Set-up fees with new lender to discharge the previous mortgage and register the new mortgage
- A transfer or assignment fee to transfer the mortgage from previous lender to new lender
- An appraisal fee to verify the value of your property (if necessary)
- Legal fees for lawyers
- Other administration fees.
You may require a new mortgage default insurance premium if your current mortgage loan is modified. For instance, if the loan amount is raised or the amortization period is increased, you should let the new lender know that mortgage default insurance is already on the existing mortgage you are switching.
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Other cases for switching mortgages
- If your mortgage term is not over and you want to switch providers, then you'll have to break your mortgage term and pay a prepayment penalty to your current lender.
- If you have a collateral mortgage, you may be required some fees for discharging your existing mortgage and registering a new one with new lender. All the loan agreements used for collateral charges must be repaid in full or transferred to new lender for discharging your mortgage.
- If you are thinking of changing your mortgage amount for amortization period at renewal time, you must refinance with your current lender instead.
It is recommended to contact an independent mortgage broker as he usually offers mortgage products from several different lenders. Also essential to get information about the lenders from broker as some of the lenders offer products directly to borrowers only, while some lenders offer their mortgage products through brokers. It's your liability to compare the mortgage products offered by new lenders with your current mortgage. Mortgage brokers usually don't charge fees for their services as they generally receive a commission from the lender.