In Canada, you’re usually not locked into your mortgage over the long term – and this can have its benefits, even with potential fees that may apply. Whether your mortgage is half-way to term or close to maturity, switching to a different lender can be a relatively simple and beneficial move. In this article, we’ll guide you through the pros and cons of making a switch and then point to helpful resources and professional support available both online and in-person.
To add some expert Meridian input, we reached out to Mike Healy, MBA, Regional Manager, Mobile Mortgage Sales. Along with general mortgage expertise, Healy will share several reasons why “Many people have been choosing Meridian when seeking a competitive alternative to the Big 5 banks in Canada, including flexible mortgage features for greater freedom of movement.”
Meridian Mortgage expert Mike Healy, MBA, Regional Manager, Mobile Mortgage Sales
First things first: Why switch mortgage lenders?
There are several scenarios in which you can benefit from switching to a new mortgage lender. The most obvious ones are getting a better interest rate, accessing some of the equity in your home, or reducing the restrictions on your current mortgage.
A new mortgage lender will often perform a fresh valuation of your home, which may uncover that the value has increased more than you realize, especially if you’ve done renovations and made other improvements to the property. If the value has gone up, you may have a strong case for a better mortgage deal – but there’s much more to consider about a mortgage provider than just interest rates. Here are 3 common reasons for switching lenders.
1. Instead of renewing with your current lender, find a new one
Mortgage renewal is the process of securing a new mortgage contract with your existing lender at the end of your current mortgage term (which is typically 3 or 5 years). Since you’ll likely go through several renewals before fully repaying the loan, there’s an opportunity to seek more favorable terms with alternate lenders.
“The end of your mortgage term is often the most advantageous time to switch your mortgage lender,” says Healy, “as it is the lowest cost period for making such a change.”
2. You’d like to pay down your mortgage faster
You might find that your current mortgage terms penalize you for making bigger or more frequent payments. Finding a new lender could help you remove this restriction as well as, potentially, giving you a lower interest rate. A possible downside is that you’ll likely face financial penalties for switching your lender in the middle of your current term. You’ll need to compare the potential savings and benefits of the new lender against the expense of switching.
Again, mortgage flexibility can also make a big difference: “At Meridian, you can pay off up to 20% of your original mortgage value annually without penalty,” notes Healy. “This flexibility enables you to make substantial progress on your mortgage repayment without incurring extra costs.”
3. Access the equity accumulated in your home
Refinancing with a new lender can be a way to free up some of the equity in your home and use the cash for home improvements or other projects. Equity is the share of the home that you fully own. Refinancing in this way typically involves a bigger mortgage with higher monthly payments, although you can reduce the immediate financial impact with a longer mortgage term.
Let’s walk through the lender switching process
Step 1: Get pre-approved
It’s always best to be pre-approval from a new lender. This ensures that you're eligible for the mortgage and you know what you can borrow.
When it comes to pre-approvals, Meridian goes above and beyond: “We conduct thorough pre-approvals by collecting all necessary documentation upfront,” says Healy. “This helps to ensure that there are no surprises, and everything goes smoothly when it's time to close.”
Step 2: Submit an application
Once you've chosen a new lender, submit a formal mortgage application with all the necessary documents.
Step 3: Consult your current lender
Now that you know what’s possible with a new lender, it may be worthwhile to negotiate with your current lender to see if they can match or beat the new terms available to you.
Step 4: Close the mortgage
When you’ve determined to go with a new lender, you and your new lender close the mortgage by paying off your old mortgage and issuing a new agreement to you.
How long does the switching process take? Switching mortgage lenders can take four-to-six weeks once your application is approved. That's why we recommend that you start the process two or three months before your current mortgage term expires.
How Meridian can be a great mortgage partner
Meridian is the largest credit union in Ontario and has a long track record of innovation.
We’ve learned how big financial decisions can cause homeowners to overestimate the difficulties and underestimate the potential savings and benefits. Not only do we offer competitive mortgage features and rates, but we also look for ways to save you money and anticipate things before they become an issue.
As Michael Healy points out, “The mortgage features at Meridian are very attractive compared to many competitors because we offer the flexibility to port your mortgage from one property to another.”
Healy also stresses how if interest rates decrease during a Meridian Mortgage term, homeowners can benefit from those lower rates through Meridian’s "blending and extending" option.
From another angle, some folks also simply prefer to “buy Canadian,” even when it comes to mortgages.
“At Meridian, we take pride in being Canadian owned and operated,” explained Healy. “When you become a Member of Meridian Credit Union you also become an owner, which means you benefit from profits being reinvested into better services and lower fees.”
As a provincially regulated financial institution, Meridian has enhanced flexibility when it comes to the mortgages we offer and approve. Whether you’re looking for a hybrid solution combining a mortgage and line of credit or something with more flexibility that could be extended to family members, we have the options you need.
“At Meridian, you can pay your mortgage using a payment schedule that works for you,” Healy adds. “You can choose from weekly, bi-weekly, monthly, bi-monthly, or accelerated weekly or bi-weekly payment plans.”
Meridian’s Home Equity Line of Credit
Did you know that Meridian Members with mortgages can borrow up to 80% of their home's value through a Home Equity Line of Credit (HELOC)? This can provide access to cash for expenses such as tuition, a once-in-a-lifetime vacation, or household repairs.
With a HELOC, you borrow against the equity in your home, which means you get a competitive interest rate and, typically, you won’t have to break your current mortgage.
Learn more about the Meridian HELOC
Reach out to us for more about switching to Meridian
When you’re ready, make an appointment with a Meridian Mortgage specialist.
To get off to a quick start, make sure you have these two documents: A copy of the mortgage renewal letter or mortgage statement from your current lender Confirmation of income, such as a pay stub or letter from your employer
Learn more about Meridian Mortgage insights
Should you renew or refinance?
6 tips for paying off your mortgage faster
Calculate how much mortgage you can afford
