August 14, 2023
Matthew Fairy

Remortgaging Versus Rate Switching

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Remortgage Versus Rate Switching - The Pros & Cons

Your mortgage is likely to be your largest financial commitment, making it crucial to have the best mortgage deal for your circumstances.

If you are coming to the end of your advantage / fixed period on your existing mortgage, or contemplating looking for a better deal, it’s worth considering whether remortgaging or rate switching (otherwise known as a product transfer) could offer a viable solution.

Both options serve different purposes and offer homeowners a range of pros and cons. In this blog we'll explore the key differences between a remortgage and a rate switch, weighing their respective benefits and disadvantages for homeowners.  

The Pros and Cons of Remortgaging

Remortgaging is the process of switching from your current mortgage to a new lender. By offering homeowners a range of benefits, like accessing different mortgage products, securing better interest rates, or even to release equity in your home, remortgaging is a popular option.

Remortgage Pros:
  1. More favourable interest rates: You can take advantage of lower interest rates in the market which can result in lowering your monthly mortgage payments and overall interest costs.
  2. Release equity in your home: If your property has increased in value, you may be able to release some of this equity by remortgaging. This can then be used for home improvements, debt consolidation, or other investments.
  3. Access different mortgage products: By remortgaging you can explore other mortgage products which may offer different terms, like fixed-rates.
  4. Ability to make material changes to your mortgage: Remortgaging allows you to extend or shorten the term of your mortgage which can prove advantageous if your aim is to pay off the mortgage quicker. This also reduces the interest paid to the lender. Conversely, if you prefer to decrease monthly payments, extending the mortgage term in years could be a suitable strategy.
  5. Flexibility in parties: One strategic advantage of a remortgage is the ability to add or remove parties named on the mortgage. This flexibility can prove invaluable in situations such as divorce or separations, enabling adjustments that align with changing circumstances.
Remortgage Cons:
  1. Additional financial costs: Remortgaging can incur certain costs like arrangement fees, valuation fees, and legal fees. These additional expenses should be factored into your decision-making process.
  2. Credit check: If you are remortgaging with a new lender a credit check may be required and this can affect your credit score.
  3. Detailed affordability assessment: Opting for a remortgage requires a reassessment of your mortgage affordability and acceptance criteria. This comprehensive assessment delves into your financial standing, considering factors like income and expenditure. To proceed, you'll need to provide updated documentation, including recent payslips.
  4. Extended timescales: The remortgage process involves thorough mortgage underwriting assessment and legal work to transfer the debt secured against your home from the old lender to the new one. This comprehensive procedure often takes between 6 to 12 weeks to complete, contributing to longer timescales compared to other options.

The Pros and Cons of Rate Switching

A rate switch is also more commonly known as a product transfer. This process is when you switch your existing mortgage deal to a new one but with the same lender. Unlike remortgaging, this option doesn't require you to change lenders or your mortgage to be underwritten.

Rate Switch Pros:
  1. Simple and fast process: Often quicker and more straightforward than remortgaging on account of staying with the same lender, rate switching requires less paperwork and has a reduced processing time.
  2. Changes to circumstances: Changes like variations to your income since the original mortgage, or a decrease in your credit report/score, do not impact the process of rate switch approval. Unlike alternative solutions, a rate switch does not require assessment of these factors.
  3. Fewer costs: Compared to remortgaging, a rate switch may come with lower associated fees, this can make it a more cost-effective option.
Rate Switch Cons:
  1. Limited product choice: When staying with your current mortgage lender there may be fewer options and limited access to mortgage products, meaning you miss out on better deals elsewhere.

Why Choose Transparent Mortgage Services?

If you are considering reviewing your mortgage options it’s crucial to seek advice from a professional. Transparent Mortgage Services are a team of independent mortgage brokers, highly experienced in remortgaging and rate switching.

What we can offer you:
  1. Expertise: Our team of mortgage advisors have extensive experience in the industry, ensuring you receive professional financial guidance tailored to your individual needs.
  2. Whole-of-market access: Unlike other advisors, we have access to a huge range of mortgage products from every lender so we can explore the entire market to find you the best deal.
  3. Personalised solutions: Your dedicated mortgage advisor will take the time to understand your financial goals and preferences to ensure you receive a customised solution that aligns with your requirements.
  4. Cost-effective: We conduct thorough cost-benefit analysis to ensure that any decision you make, be it remortgaging or rate switching, is financially advantageous in the long run.
  5. Smooth process: With our ongoing support we make the process of remortgaging or rate switching hassle-free, handling all paperwork and negotiations on your behalf.

There are many factors that determine whether remortgaging or rate switching is more advantageous for you. From your financial goals to the current market conditions, Transparent Mortgage Services will navigate you through these choices to ensure you secure the best mortgage solution for your circumstances.

Transparent Mortgage Services are authorised and regulated by the Financial Conduct Authority (FCA).

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