Mortgage advance and consel

One of the biggest fears of borrowers is that if they change financial institutions for their Mortgage, they'll be penalized in some other way. Perhaps you have a business or personal credit line that you want to keep, but are unhappy with the mortgage rate/ options.

The reality is that mortgages at discounted rates are often loss leaders for other more profitable products. There's a good chance your current mortgage lender is only breaking even on the mortgage if he matches the mortgage rate offered, while making a profit on everything else. Your manager is still measured on his mortgage portfolio, however, and will likely try hard to persuade you to stay, as soon as the request for a "payout statement" comes in from your new chosen lender.

If a threat - subtle or otherwise - is made by your financial institution in response to your request, that's a pretty good cue to take all your business elsewhere. However, in this age of short-term mortgages you could remind your current lender that you intend to apply the other institution's mortgage services to the same criteria. When that reasonable premise is acknowledged and accepted by your current lender, you then become a good prospect to be won back. And in all cases, the best lender will win!

There may be a few situations in which you are truly "stuck" with your current lender, and you should be aware of this from the outset.

• If, for example, the value of your current property has dropped faster than the mortgage balance - a fairly common experience in Ontario, for example - your mortgage may now be "high ratio" and require Default insurance. Since many people tend to have a somewhat rosy opinion of their property value, it may be worthwhile to get the new lender to have an Appraisal done before the other paperwork is undertaken. This is particularly true when even the home owner acknowledges that an unexpected insurance premium of a few thousand dollars would tend to undermine most promising deals - and it has happened many times. One exception to this rule is where you have previously obtained default insurance on your current mortgage. This insurance is transferable at no cost to a new mortgage, thus eliminating the problem described here. (See What Happens Legally When You Switch)
• Another instance where you may have trouble switching is that in which you have experienced problems with keeping your mortgage payments up to date. Your current lender may be fully justified in giving a poor Credit Report to another institution, thus making it less likely that you'll be approved for a switch. You could then be relegated to the ranks of mortgage customers paying full posted rate just to keep your mortgage, and being unable to "escape" even though your mortgage is fully open. The full posted rate is, in effect, a "penalty" whereby you compensate a lender for collection efforts or other administrative costs incurred.