When your mortgage comes up for renewal, you have a choice most people do not fully use: you can sign the renewal your current lender mails you, or you can move to a different lender for a better rate or terms. Moving is called a switch or transfer, and behind the scenes it works like a fresh application. Knowing how it works is how you decide whether it is worth doing.

A huge number of homeowners are renewing right now, many of them off mortgages they set up when rates were very different. Because I spent years underwriting files before I became a broker, I can tell you exactly what the new lender is looking at when you switch.

I read and approved mortgage files for years before I started arranging them. When I tell you how a switch is assessed, it is from having sat in the underwriter's chair.

Renewing versus switching

If you renew with your existing lender, they usually just offer you a new rate and you sign. Easy, but rarely their best rate, because they are counting on your inertia. If you switch to a new lender, that lender underwrites you fresh to win your business, which often means a sharper rate. The trade-off is that a switch means requalifying.

Yes, you requalify

This is the piece that surprises people. When you switch lenders, the new lender treats your mortgage as a new application. They confirm your income, pull your credit, and apply the stress test. For most people this is a formality. But if your income has changed, or you are now self-employed, or your credit took a hit, it matters, and it is exactly why you want someone who knows how to package the file. Staying with your current lender avoids requalifying, which is sometimes the right call for the right reasons, not just out of habit.

A switch is not a refinance

These get mixed up constantly. A switch moves the same mortgage balance to a new lender for a better rate. A refinance changes the mortgage itself, usually to borrow more against your equity or change the amortization. A switch is simpler and often cheaper. A refinance does more but involves more. Part of my job at renewal is telling you honestly which one your goal actually calls for.

What it costs, and the timing

Many lenders cover the legal and appraisal costs on a straight switch to win your file, so a switch is frequently low cost or no cost. Timing matters, though. You can usually start shopping your renewal about four months before your maturity date, and starting early means we can secure a rate hold and move without pressure. Leaving it to the last week is how people end up signing whatever is in front of them.

The bottom line

Your renewal is the one moment the whole market is open to you with no penalty to leave. In today's environment, with rates well off their recent peak, that is worth using rather than autopiloting. Bring me your renewal letter and I will compare it against more than 60 lenders and tell you plainly whether staying or switching wins.

Renewal coming up in the next few months?

Send me your renewal offer before you sign it. I will tell you honestly whether you can do better, and handle the switch if you can.

Cynthia Dreger, Mortgage Broker, Langley BC
Call or text 604-787-5136

Frequently asked questions

Do I have to requalify to switch lenders at renewal?

Yes. When you move your mortgage to a new lender at renewal, that lender treats it as a new application, so you requalify based on current income, credit and the stress test. If you simply renew with your existing lender, you usually do not requalify, which is one reason people stay put even when a better deal exists elsewhere.

Does it cost money to switch lenders at renewal?

A straight switch or transfer at renewal is often low cost or no cost, because many lenders cover the legal and appraisal fees to earn your business. A switch is different from a refinance, where you are also changing the mortgage amount or terms, which can carry its own costs. Your broker will confirm which one applies before you commit.