Switching a Mortgage at Renewal
What happens legally when you switch?
Most people are unaware of the legal effect of switching lenders.
When you renew a mortgage you are essentially starting the process
again - discharging the existing mortgage, taking out a new one,
and beginning the whole payment process, albeit at a lower
principal amount. As such, you should treat this as just as
important a process as the first time you arranged the mortgage.
Remember your situation will most likely have changed since then,
and you will require a different product with different terms
attached to suit your situation.
In most Provinces a switch of the current or lower balance
requires only a simple assignment of interest in the mortgage to
be executed by all parties and registered on title. This
assignment also attaches the specific terms that will have legal
effect, and replaces those of the transferring institution. So
even though the old mortgage is still registered on title, all
those old terms and conditions registered by your previous lender
will be completely replaced by those of your new lender under the
assignment of interest.
Moreover, the form that you are holding in your hand from the
lender who did your previous mortgage financing, has a rate that
probably is not as competitive as it could be. Don't let the
hassle from the first time you negotiated dictate you just signing
the form and sending it back to the lender - it will most probably
cost you in the form of higher rates.
The lenders count on 70% of renewers just signing the form and
mailing it in - they are not forcing you - but they are preying on
human nature to embrace convenience. However, let us do the work
for you - the same convenience, at a much lower cost to you and a
product and terms that will suit your current situation. The fact
is that it is likely another lender will give you what you want at
a rate you want - there are no legal implications to you
switching.
