It can absolutely be worth switching your mortgage lender at renewal; in many cases, it's highly recommended. Here's a breakdown of why, along with things to consider:

Why It Can Be Worth It

• Lower Interest Rates: This is often the most significant driver. Your current lender might not offer you the most competitive rate when your mortgage comes up for renewal. By shopping around, you can often find a lower rate with a new lender, which can save you thousands of dollars over the life of your mortgage. Even a slight reduction can significantly affect your monthly payments and overall interest paid.
• Better Mortgage Terms: Beyond the interest rate, a new lender might offer more flexible terms that better suit your current financial situation. This could include:
  • Increased prepayment privileges: The ability to make larger lump-sum payments or increase your regular payments without penalty, helping you pay your mortgage faster.
  • Different interest rate types: You might want to switch from a fixed to a variable rate (or vice-versa) depending on market conditions and risk tolerance.
  • Shorter or longer loan terms: Aligning your mortgage with your financial goals.
• Access to Equity or HELOC: If you want to do a significant renovation or consolidate debt, renewal is a prime opportunity to refinance and access your home equity or set up a Home Equity Line of Credit (HELOC) without paying prepayment penalties.
• Cashback Incentives: Some lenders offer cashback incentives or waived fees to attract new clients at renewal.
• Improved Customer Service: If you've had a poor experience with your current lender, switching can give you access to better customer service and more responsive support.
• No Prepayment Penalties: Unlike breaking your mortgage mid-term, switching lenders at renewal generally doesn't incur prepayment penalties, making it a cost-effective time to change.

Things to Consider

• Start Early: Begin shopping for new mortgage rates as soon as you get your renewal offer from your current lender. Most new lenders will allow you to secure a rate hold for up to 120 days, protecting you if rates rise.
• Don't Just Accept Your Current Lender's Offer: Your existing lender has less incentive to offer you their absolute best rate because they already have your business. They're counting on your inertia. Always negotiate and be prepared to show them competing offers.
• Understand All Costs: While you won't pay prepayment penalties at renewal, there can still be some costs associated with switching, such as:
  • Discharge fees (from your old lender)
  • Appraisal fees (if required by the new lender)
  • Legal fees (for registering the new mortgage)
  • Assignment or transfer fees. Many lenders will cover some or all of these fees to earn your business, so always ask about incentives or rebates.
• Requalification (Sometimes): As of 2024 in Canada, you generally don't need to pass the mortgage stress test when switching lenders at renewal, provided the mortgage amount and amortization period remain unchanged. However, if you plan to increase your mortgage amount or extend your amortization, you must requalify under current lending rules, including the stress test.
• Mortgage Brokers Can Help: A mortgage broker can be invaluable. They have access to a vast network of lenders and can often secure exclusive rates unavailable to the public. They can help you compare offers, understand the fine print, negotiate on your behalf, and simplify the paperwork. Their services are typically paid by the lender, not you.
• Review Your Financial Situation: Use renewal to assess your current financial goals, income, and any changes in your life that might impact your mortgage needs.

In summary, switching your mortgage lender at renewal is often a smart financial move that can lead to significant savings and better terms. It's crucial to be proactive, shop around, and understand all the implications before deciding.