Understanding Mortgage Transfers/Switches Vs. Refinancing
Mortgage transfers/switches and refinances are mechanisms that allow borrowers to move their existing mortgage from one lender to another, or to change the terms of their mortgage with their current lender. While these terms are often used interchangeably, there are subtle differences between them.
A mortgage transfer/switch, also known as a remortgage, involves switching from one lender to another. This could be driven by various factors such as securing a better interest rate or accessing additional features or benefits. A key caveat to these transfers/switches is that no new money is added to the principal and that your amortization period remains on schedule. On the other hand, a mortgage refinance typically involves the advancement of new funds for debt consolidation or investments or extending the amortization of your loan.
Benefits of Mortgage Transfers and Switches
Cost Savings: One of the primary motivations for mortgage transfers and switches is to secure current lower interest rate. With interest rates fluctuating over time and varying between lenders, borrowers may not find better deals elsewhere, leading to significant long-term savings.