Switching mortgage lenders can feel like upgrading to a better deal, much like trading in an old car for a sleeker model. However, just like you wouldn’t rush into a new car purchase without research, the same caution applies when switching mortgage lenders.
While it may seem straightforward, overlooking key details can lead to unexpected costs and complications.
In this blog, we will discuss common mistakes that homeowners in Ontario often make when switching lenders and how avoiding them can save you time, money, and stress.
An Overview of a Mortgage Lender vs. Mortgage Broker
Before discussing the mistakes, it is important to understand who a mortgage lender is. A mortgage lender is a financial institution, such as a bank, credit union, or private lender, that provides the funds for your home loan.
They set the terms of your mortgage, including interest rate, repayment schedule, and conditions. When you switch mortgage lenders, you are essentially moving your mortgage from one institution to another, usually to secure better terms or rates.
Each lender has their own criteria for approving loans, so understanding their requirements is key to a successful switch.
4 Key Common Mistakes to Avoid During a Mortgage Lender Switch
1. Not understanding your current mortgage terms
One of the biggest mistakes homeowners make is jumping into a new mortgage without fully understanding the terms of their existing one.
Many mortgages come with prepayment penalties or fees for breaking the agreement early, which can seriously impact your finances. These penalties usually depend on factors like your remaining balance and how much is left in your term.
If you plan to switch mortgage lenders, it is always essential to calculate these costs upfront to avoid surprises. Missing details like these can negate the savings you hope to achieve over the years.
2. Failing to compare mortgage products
A common pitfall for homeowners is focusing solely on interest rates when evaluating a new mortgage. While a low rate will always look attractive to everyone, it is important to consider the bigger picture.
Features like prepayment privileges, portability options, and fees can significantly impact your financial flexibility and long-term savings.
In your switch mortgage lender phase, always look beyond the surface. For instance, a mortgage with a slightly higher rate but better repayment options could save you more in the long run. Take the time to compare various mortgage products and ensure they align with your present and future financial goals and lifestyle needs.
3. Overlooking the impact of your credit score
Your credit score is an important factor in determining the interest rate and terms you will receive from a lender. Ignoring it can lead to unpleasant surprises when you try to switch mortgage lenders.
A strong credit score (700 and above) can unlock better rates and more favourable terms, while a lower score (below 600) might limit your options or result in higher borrowing costs.
Before starting the process, check your credit score and credit report. If you spot issues or areas for improvement, address them early. Even small improvements in your credit profile can make a big difference in securing a better mortgage deal.
4. Not seeking professional advice
Many homeowners may consider taking a DIY approach when they decide to switch mortgage lenders, but this can lead to common mistakes, such as overlooking hidden fees or miscalculating the long-term costs.
Without professional advice, you may also miss out on special mortgage products or lenders that better suit your financial situation; working with a broker changes this.
A reliable mortgage broker ensures that you make informed decisions, avoid pitfalls, and have access to the best deals that fit your needs, thus saving you money, stress, and time in the long run.
Northwood Mortgage Provides a Clear Pathway
Without the right guidance, it is easy to make a mistake that could lead to costly consequences. At Northwood Mortgage, we act as a trusted guide who helps you navigate a pool of over 50 lenders.
Whether you are looking for a better rate, refinancing options, or debt consolidation, our team of expert brokers takes the time to understand your financial goals, compare lenders’ rates, and outline all of the various options that align with your needs.
Additionally, we are also experts in commercial, industrial, and investment mortgage options, thus broadening your choices in case you have a different type of mortgage goal.
Are you ready to switch mortgage lenders? We are your best guide! Call Northwood Mortgage at 888-495-4825 or contact us online to make informed and stress-free decisions.
