Switch Rates or Remortgage?

When your current mortgage rate is about to end, you sometimes face a decision: should I switch my mortgage rate or remortgage entirely? Let us explore the key differences and factors to consider.

Thinking of Switching Mortgage Rates? Here's What You Need to Know!

 While the typical mortgage term in the UK is 25 years (or until you turn 70), the interest rate is typically set for shorter periods of 2 or 5 years. As your current rate period nears its end, your lender will provide you with a new set of rates for the next interest rate term. The process of selecting a new rate, known as "rate switching" or "choosing a deal," is relatively straightforward and can usually be completed online or with your lender's assistance.

 What Does a Remortgage Involve?

On the other hand, a remortgage is a more complex process involving replacing your existing mortgage with an entirely new one, often with a different lender. This process typically involves finding a mortgage broker, instructing a solicitor, completing a new application, property valuation, affordability checks, property searches, legal completion and registering a new charge with the Land Registry.

Timing is crucial when remortgaging, as the process can take 4 to 8 weeks or even longer, depending on factors like local authority responses to searches. It is advisable to start the process a few months before your desired remortgage date to avoid early repayment charges or being stuck on a variable rate for an extended period.

Loan Amount and Mortgage Terms

During a remortgage, you can, in principle, adjust key mortgage terms, such as borrowing a more significant amount (by releasing equity in your home), extending the mortgage length or securing a lower interest rate. However, it is essential to ensure that you can still meet affordability criteria.

Should You Switch Rates or Remortgage?

The decision to switch rates or remortgage ultimately depends on your specific circumstances and goals. Suppose you are seeking significant changes to your mortgage terms, such as borrowing more money, extending the mortgage length or securing a lower rate. In that case, a remortgage may be worthwhile despite the added complexity and costs.

However, switching rates under your existing mortgage is likely the simpler and more convenient option if you are primarily interested in continuing with a new short term rate.

Pauzible: A Potential Solution

Whether you are switching rates or remortgaging, you might be experiencing considerable financial pressure due to the dramatic increase in mortgage rates from around 2% in November 2021 to approximately 6% today, exacerbated by the cost-of-living crisis.

Pauzible can help. It allows you to freeze your monthly mortgage payments at the same level as before the increase in your mortgage rate for up to five years, thereby helping you protect your home. In return, Pauzible receives a fair share in the value of your home proportionate to its contribution. The Pauzible solution may suit you if you intend to own and remain in your home for at least three years and have sufficient equity. 

Explore detailed article, here: Remortgage vs. Switch Rates

Recommended Read: Trends and Predictions for UK Mortgage Rates in 2024