Now is an unusually favourable time to switch mortgage lenders at renewal

Why now is a good time to switch

• Aggressive pricing: Residential loan growth is well below long term averages, so lenders are discounting rates relative to their funding costs to retain or win business.
• Lower qualification burden for transfers: Regulators allow transfers without reapplying to the federal mortgage stress test in many cases, reducing the income needed to qualify for the same mortgage amount.
• Cashback offers: Banks are offering cash incentives to attract switchers, often exceeding $2,000 on average mortgages and more than $5,000 on million dollar-plus loans, subject to account and occupancy conditions.
• Upgrading credit tier: Improved debt ratios or credit scores can let homeowners move from non-prime to prime lenders, often meaning materially lower rates and better terms.
• Portability limits at current lenders: Some institutions allow only short window periods to port a mortgage when selling and buying, which can force a lender break and a penalty if closings do not align.
• Prepayment penalty structures vary: Fixed mortgage penalties can be punitive at some lenders. 'Fair penalty' lenders base costs on genuine expenses rather than producing revenue, which can limit damage if you must sell or refinance early.
• Conversion and variable rate options: If you are on a variable rate and want to lock in, compare conversion rates. Many lenders offer worse fixed rates for internal conversions than for new customers. Similarly, some lenders provide larger variable discounts than others.
• Product gaps: Not all lenders provide HELOCs or readvanceable lines. Readvanceable HELOCs increase available credit as you repay mortgage principal, a valuable feature for future renovations or emergencies.
• Retention savings: Renewing with your current lender saves them commission costs, and those savings often appear as strong retention offers. Still, the best written offer should be tested against market alternatives.

Many homeowners are still in mortgages that made sense four or five years ago, but no longer make sense with their reality today. A lot has changed over the past five years and, for many, pandemic-era decisions were made under pressure or with uncertainty.

Meaghan Hastings, CEO and principal broker, The Mortgage Coach

Costs and practical terms to check

• Confirm whether a move is classed as a switch or a refinance, and what costs follow each classification.
• Ask if cashback requires a bank account, and whether the mortgage must be owner occupied.
• Check if the lender allows rolling closing costs or penalties into the new mortgage, commonly up to a few thousand dollars.
• Secure a written rate hold well before your renewal date. Hold periods vary from one month to four months depending on the lender.

How to approach a switch

1. Get your current renewal offer in writing. Treat it as a market quote to beat.
2. Work with a mortgage broker or shop lenders directly to compare prime and non-prime options, cashback terms and prepayment penalty formulas.
3. Ask specific questions about portability, conversion rates, HELOC products and readvanceable features, and whether the offer is a true switch or a refinance.
4. Calculate the net benefit including fees, rebates and likely interest costs over your intended holding period.
5. Negotiate discharge fees and request a rate hold. Do not automatically accept the incumbent’s renewal simply because it arrives first.

Renewal time is when a clear-eyed review of your five-year plan and a real comparison of options can improve your net worth.

Robert McLister, mortgage strategist and editor, MortgageLogic.news