Definition:
A mortgage assignment, commonly referred to as a “switch,” occurs when a homeowner transfers their existing mortgage from one lender to another. This can be done for various reasons, such as securing a lower interest rate, better terms, or simply changing to a lender who better meets your needs. A mortgage switch allows you to keep your existing mortgage balance and terms, while benefiting from the new lender’s offer.

Understanding mortgage assignments

Switching your mortgage is an option available to homeowners who want to change lenders without having to pay out their current mortgage in full. It’s a simple process in which your current lender assigns your mortgage to a new lender. While this doesn’t require you to pay off your current loan balance, the new lender will usually require you to undergo a new application process, which may include a credit check and income verification.

Benefits of switching your mortgage

Switching your mortgage can offer a variety of benefits, including:

• Better rates: If interest rates have dropped or if you’re not happy with your current rate, switching could save you money.
• Improved terms: You may be able to secure more flexible terms or a better repayment schedule that suits your financial situation.
• Access to better customer service: If you’re unhappy with your current lender’s service, switching could provide you with a better overall experience.

Potential costs of switching

While switching your mortgage can offer savings, there may be some costs involved. These could include:

• Penalties for breaking your current mortgage: If you’re in the middle of a fixed-rate mortgage term, you may face prepayment penalties.
• Appraisal fees: Some lenders may require a new appraisal to determine the value of your property.
• Legal fees: Depending on the complexity of your mortgage switch, you may need legal assistance to handle the paperwork.

The process of switching your mortgage

The process for switching lenders typically involves:

• Reviewing your current mortgage terms: Understand the penalties or fees associated with leaving your current lender before making the switch.
• Getting quotes from potential lenders: Shop around to compare rates, terms, and conditions from different lenders.
• Applying with the new lender: The new lender will assess your application and may require documents such as proof of income and a property appraisal.
• Closing the switch: Once approved, the new lender will take over your existing mortgage, and the old lender will be paid off.

When to consider a mortgage switch

Switching your mortgage is most beneficial when interest rates are lower or when you’re unsatisfied with your current lender’s service. It’s also a good option if your financial situation has changed and you need more flexibility in your repayment terms. If you’re nearing the end of your mortgage term or if you’re feeling locked into a high-rate mortgage, a switch can provide a valuable opportunity to reduce costs and improve your financial situation.

Getting help with switching your mortgage

Switching your mortgage can be an important decision, and having expert guidance can make the process smoother. Mortgage brokers can help you navigate the details, compare offers from different lenders, and ensure you’re making the best decision for your financial goals.

Last modified: November 11, 2024