Essential Tips on Changing Mortgages

October 9, 2012

Since mortgages make up a large portion of the average Canadian’s monthly expense, it’s not surprising that many homeowners look for ways to improve their mortgage rates and terms by switching mortgages; particularly when interest rates are low and looking to go higher. Depending on the circumstances, changing mortgages can save money in interest charges, lower mortgage payments, or allow for paying off a mortgage quicker.

There are several reasons why homeowners may choose to refinance their mortgage – essentially cancelling the current mortgage in the middle of its term, and re-establishing it with a different lender or with different terms. provides these important facts and tips to remember when changing mortgages.

Pros & Cons

Most people choose to change mortgages to get lower mortgage rates, as this will allow them to save money over the term of the mortgage by paying less in interest. “If you can switch to a mortgage that offers better terms, such as making additional payments towards your principal, then this may be another reason to change,” says Tammy Ezer of Some lenders also offer incentives to switch mortgages to their institution, which could include favourable rates on other lending product or cash back. Plus, if there is a decent amount of equity in your home then refinancing may let you free up some capital to make other investments, pay down debt, or renovate your home to improve its value. All of these are reasons to consider refinancing.

However, be aware that there is always a downside to switching mortgages. For one, it does not reflect well on your financial stability if you are constantly refinancing your mortgage to remove equity. Nor will it help you in the long run if you take the equity and spend it on frivolous purchases, as you are simply extending how long it will take you to be mortgage-free. Keep in mind that there are also costs and potential penalties associated with refinancing that may cut into any potential savings.

Refinancing Costs

Before committing to a mortgage change, calculate the costs involved and compare them against any savings achieved through a rate reduction, or other advantages including freeing up equity or consolidating debt. Refinancing is similar to taking out a new mortgage; you will likely need an appraisal of the property as well as paying legal fees for paperwork and filing. Talk to your lender about penalty or cancellation fees. This fee can vary depending on the amount of your mortgage, the amount left in your term, and the difference between current interest rates and your original mortgage rate. A good rule of thumb is to calculate, at a minimum, three months of interest, although the penalty can run higher.

After you have run the calculations and find that refinancing will provide you with an advantage, you can begin the process by contacting your new lender and a notary or lawyer to process the documentation.


You should mention that some of the penalties mentioned only apply when you refinance before the end of term of your mortgage and that many banks will pick up legal costs and sometimes the appraisal fee, if the new business is by way of a broker. Let’s give our readers all the info. If not, at least a link to more detailed information. After all we are neighbours, a community and we owe it to our friends to help them as much as we can.
Paul G.

Paul Gordon says: