This vs That 8: Renew or Switch Lenders

Michael Hallett • Apr 28, 2017
Renew (the mortgage industry meaning): to remain with the current lender by simply signing the renewal letter that comes in the (e)mail.

Switch (again, the mortgage industry meaning): to move from the existing lender to a different lender without leveraging any additional funds/equity; the outstanding balance remains the same.

Is renewing your mortgage with the current lender the best option, or should you consider switching to a new lender? The answer is provided with some simple math. As mortgage consumers, we want to save as much money as possible, plain and simple.

Seventy percent of borrowers that currently hold a mortgage simply sign the renewal letter they get. Most of the time they are leaving 20 – 40 basis points or 0.20% – 0.40% on the table. This puts millions of dollars back into the pockets of the lenders and their shareholders.

There are times when the current lender does not offer the best market rate or product for your situation. How will you know you are getting the best rate for your scenario? By contacting an impartial Mortgage Broker who works for you… not the lender.

So first things first: contact your Mortgage Broker four months before the term matures to discuss the next term’s strategy. What do the next two, three or even five years look like? This will then lead to an interest-rate discussion. Can there be some money saved?

I have been working with a client over the past couple of weeks as her current mortgage is coming to maturity. Had she just signed at the bottom of the renewal letter she would have been overpaying by 30 basis points.

Current lender offered 2.84% for a 5-year Fixed term (Renew)

New lender offered 2.54% for a 5-year Fixed term (Switch)

Here’s what that looks like. Note the mortgage balance used was $330,000 (25-year amortization). This just happens to be the average mortgage amount in British Columbia.

                Monthly Payment       Annual Payment       Payments Over 5 Years      O/S Balance After 5 Years     Interest Paid

2.84%                $1,534.74                      $18,416.88                $92,084.40                            $281,194.12                             $43,278.52 
2.54%                $1,484.87                      $17,818.44                $89,092.20                            $279,529.82                             $38,622.02

Total Savings  $49.87                          $598.44                       $2,992.20                              $1,664.30                                $4,656.50


The biggest saving is in the total interest saved over 5 years. At the end of the day this borrower saved $4,656.50. Guess what she decided to do? Yes, SWITCH lenders.

In this scenario, it will cost the borrower $0 to make a switch. Would you put four 1000-dollar bills, six 100-hundred-dollar bills, one 50-dollar bill, one five-dollar bill, one loonie and two quarters in the fire? No, you would not.

Bottom line, make sure you have a discussion with your independent Mortgage Broker before (potentially) burning thousands of dollars.

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Getting a Mortgage While on Parental Leave

By Michael Hallett • 01 May, 2024
Chances are if the title of this article piqued your interest enough to get you here, your family is probably growing. Congratulations! If you’ve thought now is the time to find a new property to accommodate your growing family, but you’re unsure how your parental leave will impact your ability to get a mortgage, you’ve come to the right place! Here’s how it works. When you work with an independent mortgage professional, it won’t be a problem to qualify your income on a mortgage application while on parental leave, as long as you have documentation proving that you have guaranteed employment when you return to work. A word of caution, if you walk into your local bank to look for a mortgage and you disclose that you’re currently collecting parental leave, there’s a chance they’ll only allow you to use that income to qualify. This reduction in income isn’t ideal because at 55% of your previous income up to $595/week, you won’t be eligible to borrow as much, limiting your options. The advantage of working with an independent mortgage professional is choice. You have a choice between lenders and mortgage products, including lenders who use 100% of your return-to-work income. To qualify, you’ll need an employment letter from your current employer that states the following: Your employer’s name preferably on the company letterhead Your position Your initial start date to ensure you’ve passed any probationary period Your scheduled return to work date Your guaranteed salary For a lender to feel confident about your ability to cover your mortgage payments, they want to see that you have a position waiting for you once your parental leave is over. You might also be required to provide a history of your income for the past couple of years, but that is typical of mortgage financing. Whether you intend to return to work after your parental leave is over or not, once the mortgage is in place, what you decide to do is entirely up to you. Mortgage qualification requires only that you have a position waiting for you. If you have any questions about this or anything else mortgage-related, please connect anytime. It would be a pleasure to work with you.

Bridge Financing and Deposit Lending

By Michael Hallett • 24 Apr, 2024
Let’s say you have a home that you’ve outgrown; it’s time to make a move to something better suited to your needs and lifestyle. You have no desire to keep two properties, so selling your existing home and moving into something new (to you) is the best idea. Ideally, when planning out how that looks, most people want to take possession of the new house before moving out of the old one. Not only does this make moving your stuff more manageable, but it also allows you to make the new home a little more “you” by painting or completing some minor renovations before moving in. But what if you need the money from the sale of your existing home to come up with the downpayment for your next home? This situation is where bridge financing comes in. Bridge financing allows you to bridge the financial gap between the firm sale of your current home and the purchase of your new home. Bridge financing allows you to access some of the equity in your existing property and use it for the downpayment on the property you are buying. So now let’s also say that it’s a very competitive housing market where you’re looking to buy. Chances are you’ll want to make the best offer you can and include a significant deposit. If you don’t have immediate access to the cash in your bank account, but you do have equity in your home, a deposit loan allows you to make a very strong offer when negotiating the terms of purchasing your new home. Now, to secure bridge financing and/or a deposit loan, you must have a firm sale on your existing home. If you don’t have a firm sale on your home, you won’t get the bridge financing or deposit loan because there is no concrete way for a lender to calculate how much equity you have available. A firm sale is the key to securing bridge financing and a deposit loan. So if you’d like to know more about bridge financing, deposit loans, or anything else mortgage-related, please connect anytime! It would be a pleasure to work with you.
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