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What is a mortgage rate switch?
A mortgage rate switch (also known as a product transfer) is when you renew your mortgage deal with your current lender when your rate expires or you are already on the standard variable rate.
This means that rather than going through the process of remortgaging to a new lender, you select one of the lender’s retention products available to you.
This often means that the process is much more straightforward than moving to a new lender, as depending on the lender, it can remove the need for full underwriting, property valuations, gathering of all documents and the legal process of paying back your lender.
The disadvantage of mortgage rate switches is that your current lender may not offer you the best mortgage rates or most competitive product overall.
As a result, it is recommended that you talk to a mortgage adviser who can look at your lender’s retention products vs those offered by other lenders in the market to weigh the pros and cons of remortgaging.
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Is it best to take a mortgage rate switch or to remortgage to a new lender?
Whether it is best to take a rate switch or move to a whole new lender will depend upon the products available and your individual situation.
Sometimes, remaining with your current lender may not be the best solution for you if the mortgage deals are more expensive than the products other lenders offer.
However, it is also essential to factor in the additional time you may spend gathering documents and dealing with valuers and conveyancers if you go through a remortgage.
You may decide that paying a small premium to remain with your current lender is worthwhile to spend less time on the mortgage process and carry on with your daily life.
Your current lender may be able to offer products that are suitable for your situation.
For instance, if you plan to sell your house within one year and do not want an early redemption penalty on your mortgage, some lenders may not be able to offer you a rate switch without this penalty.
If you took a 2-year fixed retention product with the lender and sold the property within this period, you would need to factor in the extra cost of paying them back.
In this situation, you should talk to an independent mortgage adviser, telling them about your intentions with the property, so they can look for a product that suits your needs accordingly.
Therefore, in some cases, it may make sense to remain with your current lender. However, it would help if you took independent advice discussing your full situation for a recommendation to be made.
Do all lenders offer a mortgage rate switch?
Although most lenders will offer rate switches, some lenders make you go through a lengthy application process requiring full underwriting to qualify for a new product. The lenders that generally do this are specialist lenders.
Most high street lenders can offer you a new product when you end your deal, assuming you have successfully paid your lender and not breached any of the mortgage terms.
If you are with a lender that no longer offers new mortgages to borrowers, it may be that they cannot provide a rate switch mortgage, and you remain on their standard variable rate.
This can be an expensive way to borrow, so in this circumstance, it would be recommended to look for an experienced mortgage adviser who could look into which other lenders you may qualify for, depending on your situation.
Do I need a mortgage broker for a mortgage rate switch?
You may not need a mortgage adviser to return to your current lender for a rate switch.
Some intermediary-only lenders can only offer switching via a registered, regulated mortgage broker.
In this situation, you would need to look for a mortgage adviser to manage the transaction.
Most high street lenders can offer if you want to have a mortgage rate switch via their website.
Each lender works differently, so you can research this by looking on your lender’s website or giving them a call. It is always recommended that you talk to a mortgage adviser when making any changes to your mortgage.
Many lenders are not able to give you professional mortgage advice when it comes to selecting a deal on your mortgage rate switch.
This means that you may not be selecting the most suitable product based on your future intentions.
If you would like I NEED ADVICE to match you with a regulated mortgage adviser that can review your lender’s current products alongside the rest of the market. Please complete the contact form.
Is taking a mortgage rate switch deal easier than remortgaging?
Taking a mortgage rate switch is usually easier than applying for a whole new mortgage with a new lender.
This is because the existing lender often does not need so many documents, a surveyor to visit the property or a legal process to pay back the current lender and replace it with a new one.
This means that the time you need to spend arranging your new mortgage should be less than if you were changing lenders.
A full remortgage requires documents such as ID, proof of address, payslips, bank statements, and more, depending on the lender.
In addition, they would often send out a surveyor to visit your property, and a conveyancer would be required to oversee the legal process.
This usually makes things more long-winded than a simple rate switch. Not all lenders operate the same way, so some mortgage lenders require applicants to go through the underwriting process before they offer them a new mortgage deal.
When this is the case, the difference between a mortgage rate switch and a full remortgage, in terms of time spent on the process, may not be so significant.
Your mortgage adviser will know what is involved regarding a mortgage rate switch with your lender vs looking at a whole new one.
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Will I still get a mortgage rate switch if I have bad credit?
If you remain with your existing lender, you should still be offered a mortgage rate switch, even if you have bad credit.
Most lenders will not conduct a credit check if you replace your deal with a new one.
Many borrowers choose to take a mortgage rate switch because they cannot source a competitive mortgage elsewhere due to bad credit.
Every lender has a different process, so a few may require a credit check before they can offer their borrower a new product.
If your mortgage account has been in arrears, your mortgage lender may not be willing to give you a new deal.
You should phone your lender to discuss this matter if this is the case. Poor credit comes in many forms, including defaults, arrears, county court judgements, debt management plans, individual voluntary arrangements, bankruptcies, etc.
If you have bad credit, make sure that you tell your mortgage adviser the full situation so they can look for a lender accordingly. If you would like more details about your credit history, you can go to Check My File to sign up for a free trial.
Conclusion
Taking a mortgage switch is usually easier than applying for a full remortgage.
Mortgage rate switches differ from lender to lender, so the ease of getting a mortgage rate switch will vary depending on who your mortgage is with.
It is always recommended to talk to a mortgage adviser who can look at your lender’s retention products and the rest of the market to determine who would give you the best outcome.
Sometimes your existing lender’s products may not be the most competitive or suitable for your situation. An experienced mortgage broker would be able to advise what is most ideal for you.
If you would like I NEED ADVICE to match you with a qualified and experienced mortgage adviser who can offer you a free consultation; please complete the contact form.
The information on this page is not tailored to any individual readers and should not be considered financial advice under any circumstances.
If you are seeking advice about a mortgage, you should consult a qualified professional.
