Should you switch lenders when renewing your mortgage?

With each mortgage renewal comes the opportunity for borrowers to assess their current deal and look for options that would better suit their needs. While it is common for borrowers to renew their home-loan deal with their current lender, it may sometimes be more practical to shop around.

If you are thinking of switching, you should know that as a rule of thumb, it is crucial for borrowers to prepare for their mortgage renewal as early as four months before their current term's maturity date. This will give you ample time to plan your next move, assess your current needs, and look around for other offers in the market.

When looking for a new lender, you have to determine what you are looking for in a mortgage product. Are you looking for a product that has more flexibility when it comes to extra repayments? Are you considering switching to a variable or a fixed rate? Are you thinking of getting a lender that charges nothing for interest offset mortgage? Are you planning to borrow more money from your new lender?

Also read: What to expect during your mortgage renewal

When you know exactly what you want in a mortgage, you can find the right product in a sea of home-loan offers in the market. This will make your mortgage renewal process easier to dive into.

Switching to another lender means undergoing another home-loan application. And while the process is less stringent than the first time you apply for a loan, you will still need to pass a stress test. This means that the bank will require you to prove that you can afford payments not just at the current rate, but at a higher qualifying interest rate.

Should you overcome the stress-test hurdle, you will need to prepare for the fees associated with switching lenders. You may encounter fees such as set-up fees, transfer costs, appraisal fees, and other administration charges. Make sure to ask your new bank if they will be covering the fees charged by your old lender.

You have to be careful with these costs, however. If you think the savings you would get from switching is worth the trouble and dollars you will spend switching, then do not hesitate to go for it.

The trick here, however, is to do your renewal with a mortgage broker. A mortgage broker can help you get the most competitive offer in the market not just in terms of interest rates, but also the benefits. Getting help from a mortgage broker will help you narrow down your options based on your current finances and needs.

Which Mortgage can connect you to mortgage brokers who can assist you in your home-loan renewal. Click here to reach out to mortgage brokers near you.

More Mortgage Guide