Mortgage Refinancing vs. Mortgage Switch

Couple with a mortgage broker sitting down to understand the difference between a mortgage switch and refinancing.
Dec 5, 2023 | Jason Anbara

Mortgages play a pivotal role in homeownership, providing individuals with the financial means to purchase property. As life progresses and financial landscapes evolve, homeowners often consider adjusting their mortgage arrangements. Two popular options for this are mortgage switching and mortgage refinancing. Although these terms are sometimes used interchangeably, they represent different options as they relate to mortgages, and each comes with its own unique considerations.

At Jason Anbara Mortgages, we’re well-versed in both of these options as they relate to our clients’ financial goals. In this post, we’ll break down the key differences, processes, benefits, and ideal situations for each, aiding you in making informed decisions about your home loan.

Understanding Mortgage Switch and Refinancing

Both a mortgage switch and a refinancing involve altering the arrangement of your existing mortgage. Let’s break these terms down in more detail:

What is a Mortgage Switch?

A mortgage switch is essentially a strategic move by homeowners to transition their current mortgage from one lender to another. This transfer usually maintains the core aspects of the loan but seeks to benefit from better terms or lower interest rates offered by a different lending institution. It’s a maneuver aimed at optimizing one’s financial situation by leveraging improved conditions in the market.

What is Mortgage Refinancing?

Mortgage refinancing involves the deliberate action of settling an ongoing mortgage by acquiring a new loan, typically with altered conditions such as revised terms, modified interest rates, or even adjustments to the loan amount. This process offers flexibility – you can choose to refinance with your existing lender or explore new horizons with a different one. The goal here is to reshape your mortgage in a way that aligns better with your current financial objectives and circumstances.

Key Differences Between Mortgage Switch and Refinancing

If you’re considering alternative options because of current mortgage limitations, researching a mortgage switch and refinancing might have you believing these circumstances are inherently similar. However, they do have several differences:

Process and Purpose

  • Mortgage Switch: Primarily involves transferring an existing mortgage to a new lender without substantial changes to the loan terms.
  • Mortgage Refinancing: This involves obtaining a new loan, paying off the existing mortgage, and potentially modifying loan terms, rates, or loan amounts.

Costs and Fees

  • Mortgage Switch: This may involve minimal fees associated with transferring the mortgage to a new lender, such as penalties for breaking the existing mortgage.
  • Mortgage Refinancing: Typically incurs various fees such as closing, appraisal, and application fees.

Interest Rates

  • Mortgage Switch: Aims to secure better interest rates or terms offered by the new lender.
  • Mortgage Refinancing: Allows for securing lower interest rates, switching between fixed and adjustable rates, or changing the loan term.

Term Adjustment

  • Mortgage Switch: Usually maintains the remaining loan term from the original mortgage.
  • Mortgage Refinancing: Allows for adjusting the loan term—shortening or lengthening it—according to the borrower’s preferences.

When to Choose Mortgage Switching

Breaking your current mortgage for a mortgage switch can be helpful in certain circumstances. If you’re considering this option, we recommend speaking to Jason Anbara. We’re happy to walk you through if a mortgage switch is the right move, especially in cases where:

  • Better interest rates or terms are offered by a different lender.
  • Minimal alterations to the loan terms are desired.
  • The existing mortgage is still within its favourable terms.

Benefits of Mortgage Switching

Mortgage switches come with a few key benefits, including:

  1. Potentially lower interest rates.
  2. Access to additional features or benefits from a new lender.
  3. Simplified process with fewer complexities compared to refinancing.

Situations Where Mortgage Switching is Ideal

There are select instances when a mortgage switch is a better option than refinancing. For example, if your financial situation has remained the same, yet you want to take advantage of decreasing interest rates, a mortgage switch is an ideal solution. This may also be fuelled by a desire to take advantage of promotions or better terms offered by new lenders.

How to Initiate a Mortgage Switch

If you’re looking to get the ball rolling on this type of mortgage, the best thing you can do is reach out to us. We have access to numerous lenders and can do the research for you to compare offers and compile information. Once you’ve chosen your preferred lender, we’ll get the paperwork in order and assist you in proceeding with the lender’s requirements. 

When to Choose Mortgage Refinancing

Refinancing can be advantageous for many reasons. We’ve worked with numerous clients who are interested in this arrangement option, and we find it can be best in times when: 

  • Significant changes in the market offer considerably lower interest rates.
  • A change in loan terms is needed, such as switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage (FRM), is desired.
  • Accessing home equity or consolidating debts is necessary.

Benefits of Mortgage Refinancing

There are a few varied benefits of mortgage refinancing that are distinctly different from a mortgage switch. Each of these relates slightly more to financial factors:

  1. Potential for substantial savings through lower interest rates.
  2. Alteration of loan terms according to changing financial goals.
  3. Opportunity to access equity for home improvements or debt consolidation.

Situations Where Refinancing is Ideal

Whether you have talked with someone who has previously refinanced or researched some information online, understanding the process of refinancing is also about determining whether it’s an appropriate choice. This could be the case if:

  • There has been a reduction in market interest rates.
  • There is a need to modify the loan structure due to changes in financial goals or circumstances.
  • You have a desire to tap into home equity for renovation or debt consolidation purposes.

How to Start the Refinancing Process

If you’re considering refinancing, we recommend evaluating your immediate financial situation and reasons for pursuing this option. By setting up an appointment with us, we can explain the alternative arrangements available and research various lenders. We’ll submit your application, provide them with the documents, and be there every step of the way as your refinancing request goes through.

Let Us Lend a Hand

At Jason Anbara Mortgages, we understand the significance of choosing between mortgage switching and mortgage refinancing. Mortgage switching tends to be a simpler process and presents the opportunity to potentially secure lower interest rates. However, refinancing offers a broader scope for homeowners, including changing interest rates from variable to fixed, amongst other mortgage modifications, such as borrowing more funds.

We emphasize the importance of thorough consideration and are here for you every step of the way. If you are considering other avenues to tap into your home’s equity, we can also help with second mortgages or reverse mortgages. We are here to answer your questions and help you make the most informed decision when it comes to your mortgage. To get started with the process, reach out to us today.

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Jason Anbara
Jason Anbara
Mortgage Broker
Jason Anbara, Founder, CEO, and Principal Mortgage Broker, has been dedicated to realizing the homeownership dreams of countless clients through his mortgage services business. A distinguished graduate in International Management with Honours, Jason also holds a Bachelor of Commerce from The Telfer School of Management at the University of Ottawa.

Driven by a passion for his community and the positive influence he has on both new and existing residents, Jason has garnered multiple accolades and awards. These recognitions underscore his unwavering commitment to providing exceptional customer service

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