I will be providing below some considerations when looking at rate switching or remortgaging. Before I start it is worthwhile pointing out that all lenders will have their own rules and processes and a rate switch may not always be available to everyone. Additionally every person has their own needs and circumstances and should consult an independent financial adviser in order to make an informed decision on what is best for them.
When applying for a rate switch, a valuation is unlikely needed as your current lender may index link the value of your property. For a remortgage however the lender will more often than not conduct a physical valuation. There are pros and cons to either side of this. If you haven’t made any changes to your property and you are simply looking for a better rate, then the rate switching valuation may be sufficient. However if you have made any improvements to your home, ‘desk top’ valuations won’t reflect this and a valuation will give a true value for your property.
The product choice available will be limited to your current provider when looking to rate switch. However you will have access to the whole market if you shop around. What’s to say that because your existing lender was right for you before they still are now? For example, if you were restricted to your existing lender due to credit issues, your circumstances could have dramatically improved since then and you may be able to look at a wider range of lenders offering more competitive deals.
Something else worth bearing in mind is, if you are wishing to capital raise for reasons like debt consolidation or home improvements, it is an unlikely option when rate switching as that will be a further advance application, depending on circumstance you may be better off exploring the option of remortgaging or looking at a second charge.
In general, rate switching is going to be a faster and easier process then remortgaging. That’s not to say that remortgaging is particularly difficult, and you shouldn’t make the decision based on speed alone, but a rate switch will take considerably less time to arrange due to the limited paper work required. A rate switch could possibly take a matter of days to arrange compared to several weeks or months for a remortgage.
Daniel Brown BSc (Hons), Cert SMP
18th June 2018