Stick or Twist
Posted on 19 March 2015 by
In his article about remortgaging (or rather, the lack of it) Alistair Hargreaves asked why some clients have not moved from one provider to another.
In situations where remortgaging fees are not prohibitive, it might look crazy to outsiders that when rates are so low, some people do not refinance. However it may be that a potential client is unable to change lenders. This could be for a number of reasons, such as credit problems, issues around income or a property that other banks would not consider.
If you find yourself in the above situation you may worry that you’ll be stuck on your current lender’s Standard Variable Rate (SVR), and subject to your lender’s rates changes as and when the bank wants to move. However there could be an alternative to this – a product switch.
As the name suggests, it’s where you move from one deal with a lender to a new product with that same lender. Your mortgage term and underwriting remains the same – it’s just your rate that changes. And this is why a product switch can be such a good option if you are unable to remortgage, as the lender will not re-assess the case again.
In layman’s terms this simply means the bank will carry out an admin task to move you from one product to another and it does not go back to underwriting to be looked at again. If your situation has changed from when you made the application, you could be moved from your old rate to a new one. The main drawback, though, is that you can’t make material changes to your mortgage, apart from paying off a lump sum. If you wish to borrow more money or extend the term it needs to go back to an underwriter.
Some lenders allow a broker to manage this process, some you have to go direct to, but we can confirm how it is done. And it’s not just for clients whose situation prevents them from moving to another lender – depending on an individual’s circumstances, it can be beneficial for those with more freedom to switch to a different rate with their current provider.
So if you are worried about remortgaging because your situation has changed, or you want to discuss your current finances then please contact myself or one of my expert colleagues and we can guide you from there.
This article is for information only and does not constitute advice. Please obtain professional advice before taking out a mortgage. Your property may be repossessed if you do not keep up repayments on your mortgage, or any debt secured on it.
All information is correct at the time of publication
The blog postings on this site solely reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.