Should you stick with your current lender or switch? Pros and Cons of staying vs moving to a new lender for better options
Are you nearing your mortgage renewal? It's a question many Canadian homeowners face: should you stay with your current lender or shop around for better options? This decision can significantly impact your financial well-being so it's essential to weigh the pros and cons carefully. Let's break down what you need to know.
The Appeal of Staying Put: Convenience and Familiarity
There's a certain comfort in sticking with what you know. Staying with your current lender offers:
Convenience: You're already familiar with their systems and processes. Less paperwork and a smoother renewal can seem very attractive.
Potential Loyalty Rewards: Some lenders offer preferential rates or terms to existing customers. This can make negotiations easier.
Simplicity: Avoiding the stress of switching lenders can be appealing, especially if you're busy.
The Drawbacks of Sticking Around: Potential Missed Savings and Limited Options
However, staying loyal could cost you:
Potentially Higher Rates: Your current lender might not offer the most competitive rates. They know you're already a customer so they might not offer their best rate.
Missed Opportunities: Other lenders may offer better mortgage features, more flexible terms, and cashback incentives.
Limited Additional Borrowing Options: If you're looking to borrow additional funds (for renovations, debt consolidation, etc.) your existing lender may not have the best options tailored to your specific needs. Other lenders might offer more competitive rates or more suitable loan structures.
The Advantages of Switching: Better Rates and Features
Switching lenders can open up a world of possibilities:
Better Interest Rates (Potentially Lower Than Your Current Lender Offers): Securing a lower interest rate than your existing lender can save you thousands of dollars over the life of your mortgage. Your current lender may not be providing the most competitive rates available in the market.
Improved Mortgage Features: Access to more flexible prepayment options, better terms, or other beneficial features that suit your needs.
Better Equity Access: If you need to access your home's equity (for renovations, debt consolidation, investments, etc.) other lenders may have more favorable options such as Home Equity Lines of Credit (HELOCs) or more flexible terms for refinancing.
Cashback or Incentives: Some lenders offer attractive cash incentives to attract new customers which can help offset switching costs.
The Challenges of Switching: Time and Potential Costs
Of course, switching isn't without its challenges:
Time and Effort: It requires research, application submission, and potential legal fees.
Potential Breakage Fees: Your current mortgage may have penalties for early termination.
Stress of Transition: Dealing with a new lender can be stressful.
Lender Competition at Renewal: The Battle for Your Business
It's a very competitive market right now, especially with approximately 1.2 million Canadian mortgages coming up for renewal in 2025. This large number of renewals means lenders are actively vying for your mortgage business. This means you have a lot more leverage than you think. Many lenders are offering enticing incentives to attract new customers or retain existing ones. Here are some of the common perks you might encounter:
Cashback Offers: Some lenders provide significant cashback rebates which can help offset any potential costs or be used for other financial goals.
Reduced or Waived Legal Fees: Legal fees associated with switching lenders can be a deterrent. However, some lenders are offering to cover or significantly reduce these costs.
Switching Fee Coverage: If your current lender charges fees for breaking your mortgage, the new lenders may offer to cover these fees making the switch more financially viable.
Special Renewal Rates: Some lenders will offer special discounted rates available only to people that are switching to their institution.
Flexible Terms and Features: Beyond rates, other lenders may offer more flexible prepayment options, longer amortization periods, or other customized features to meet your specific needs.
Knowing that these incentives are available can empower you to negotiate a better deal. Don't hesitate to ask your Mortgage Brokerage about current offers and compare them carefully.
Here is a link to an article that helps to understand the current renewal climate.
Key Factors to Consider Before Deciding
Before making your decision consider these factors:
Current Interest Rates: Compare your current rate with market rates.
Mortgage Renewal Timeline: How much time do you have to make a decision?
Breakage Fees: Carefully calculate the cost of breaking your current mortgage.
Financial Goals: Consider your long-term financial plans.
Individual Circumstances: Self-employed? New immigrant? Credit challenges? Your situation matters.
The Value of a Mortgage Broker: A Mortgage Agent, like those at themortgagemarketplace.ca can shop around for the best rates and terms, saving you time and money.
The Bottom Line: Do Your Homework
Ultimately, the decision to stick or switch is a personal one. Thoroughly evaluating your options is crucial. Don't be afraid to explore what's out there. And remember, a Mortgage Brokerage can be an invaluable ally in this process.
Ready to Explore Your Mortgage Options?
At Seventy Seven Park we're here to help you navigate the complexities of mortgage renewal. Contact us today for a personalized consultation.