Is it a good time to switch your mortgage?
If you've found a better interest rate or your mortgage is up for renewal, you might wonder, "When can I switch?"
Switching lenders can save you money, but timing is key to avoid prepayment fees. Here’s how to determine if it’s the right choice for you.
CIBC
Feb. 19, 2025
4-minute read
Key indicators it might be time to switch mortgage lenders
If you’re questioning when it’s a good time to switch mortgage lenders, there are a few key indicators you can use to inform your decision, such as:
Falling interest rates
Mortgage rates fluctuate based on the state of the economy. Keep an eye on mortgage interest rates to see if you can find a lender that offers lower rates than your current provider. By switching to a lower rate, you might be able to decrease your payments and save more over time. See the section titled "Prepayment fees" to learn more about prepayment charges.
Need for flexible repayment terms
Some lenders offer prepayment privileges to help you pay off your mortgage faster. With CIBC mortgages, you can make an additional lump sum payment of up to 10% of your mortgage balance per year on fixed-rate mortgages or up to 20% on variable-rate mortgages.
You can also increase your regularly scheduled payment amounts up to 100% to help pay off your mortgage faster.
Similarly, some lenders may have interest rates or cashback offers that can help you save more money. For example, when you switch from another lender to select CIBC mortgages, you may get some cash back.
When it might not be the right time to switch
Before switching to a new mortgage lender, you can look for factors that may suggest it’s not the right time. Some examples include:
Prepayment fees
If you want to switch your mortgage before it’s up for renewal, you may have to pay a prepayment fee. The cost of the prepayment fee depends on factors such as:
- How long you have left in your term
- Your interest rate
- How the prepayment fee is calculated
Often, the prepayment fee is calculated as the interest rate differential (IRD) or three month’s worth of interest, whichever is higher.
Review your mortgage agreement or check with your lender to see how they calculate prepayment fees. It’s also a good idea to calculate whether the potential cost savings associated with switching to a new lender outweigh the fees.
Minimum mortgage balance
If you only have a small balance remaining on your mortgage, the costs associated with switching might outweigh the potential savings. Make sure you understand all of the costs and fees involved with switching and calculate whether it’s financially worth it.
Interest rate uncertainty
If interest rates are volatile, switching mortgage lenders might not be the best move. However, if you are considering switching to CIBC, the rate you are quoted is held for 120 days. This means if mortgage interest rates go up before your mortgage funds, you're protected with a locked-in rate.
When is it too late to switch mortgage lenders?
If you want to switch mortgage lenders, don’t leave it until the last minute, especially if you want to make a move before your mortgage is up for renewal. It’s a good idea to start thinking about the switching process six to eight months before your renewal date. This gives you time to research lenders and compare offers. Waiting until right before your renewal can limit your options and could result in missing the best interest rate.
How to evaluate if switching is right for you?
There are a few actions you can take to evaluate if it’s a good time to switch your mortgage, including:
• Calculate savings vs. costs. While you might find a lender that offers a lower interest rate, you also need to consider the upfront costs associated with switching and the prepayment fees. When you move your mortgage to CIBC and do not increase the amount or refinance, you won’t incur any legal or set-up fees. It’s a good idea to perform a calculation to determine if it will cost you more in fees to switch than your potential cost savings.
• Use a mortgage calculator. To help estimate how much you could save by switching mortgage lenders, you use CIBC’s mortgage payment calculator.
Making the right move: Is it time to switch your mortgage?
While there’s potential to save when you switch mortgage lenders, timing matters. Starting the process before the end of your mortgage term gives you enough time to compare different lenders and find the best interest rate and terms. Switching at the end of your term also helps you avoid fees associated with breaking your contract early.
For more information on switching your mortgage, visit CIBC.
