Your mortgage renewal letter shows up in the mail. The rate your bank is offering doesn't look great. Or maybe your financial situation has changed and you need access to your equity. Either way, you're wondering: should I refinance or switch?

What's the Difference?

Switching (or Transferring)

Switching means you move your existing mortgage to a different lender — usually to get a better rate. The mortgage amount stays the same. You don't borrow more or change the terms in a big way.

The best part? In many cases, the new lender covers the legal fees for the switch. So it can be essentially free to save money.

Refinancing

Refinancing means you break your current mortgage and take out a new one — usually for a higher amount. People refinance to:

  • Access home equity — to pay off debt, do renovations, or invest
  • Consolidate debt — roll high-interest credit cards or loans into your mortgage at a much lower rate
  • Change their mortgage terms — maybe switch from variable to fixed, or extend the amortization
  • Remove someone from the mortgage — often after a separation

When Does Switching Make Sense?

Switching is usually a great idea when:

  • Your renewal is coming up and your current lender isn't offering a competitive rate
  • You're happy with your current mortgage amount — you just want a better deal
  • You want better terms — like prepayment privileges or a more flexible penalty structure

When Does Refinancing Make Sense?

Refinancing is better when:

  • You need to access cash from your home equity
  • You want to pay off high-interest debt (think: credit cards at 20% vs. mortgage at 5%)
  • You're going through a separation and need to buy out your ex
  • You want to renovate and need funds

What About Penalties?

If you break your mortgage before the term is up, there's usually a penalty. For variable-rate mortgages, it's typically 3 months of interest. For fixed-rate mortgages, it can be much higher — sometimes tens of thousands of dollars.

A mortgage broker can help you figure out the penalty and whether refinancing still saves you money even after paying it.

Your bank is counting on you to just sign the renewal letter. Don't. Shop around. You could save thousands over the next five years.

Bottom Line

Whether you switch for a better rate or refinance to access equity, the important thing is not to just accept whatever your current lender offers. There are almost always better options out there.

Reach out to us and we'll compare your options side by side. No cost, no obligation.