In some situations, it makes sense to pursue a product transfer rather than a full remortgage. We explore how it works and what to consider.
What is a product transfer?
A product transfer is an alternative to remortgaging. It’s where you change your mortgage deal but stay with your existing lender.
When you reach the end of a fixed rate deal with your existing lender, it’s time to look at your mortgage options. Otherwise, you will be put on the lender’s Standard Variable Rate, which is a very expensive way to borrow. It will considerably increase the monthly repayments on your mortgage.
Product transfers are available on all kinds of loans, including Buy to Let mortgages, as long as you meet the criteria for the new product.
How is a product transfer different to a remortgage?
With a product transfer you’re switching to a new product with your existing lender. Meanwhile, a remortgage is moving your mortgage to a new lender. You are taking out a whole new mortgage and using it to repay your current deal.
How does a product transfer work?
A product transfer is generally faster and simpler than a full remortgage. It’s important to compare various options to help you decide whether a product transfer is the most sensible approach. Your existing mortgage lender will offer various different products, but they may not be the most competitive in the marketplace.
If you choose to stay with your current lender, there won’t be any need for an affordability assessment. The lender may do a desktop valuation of your property to see if your Loan to Value ratio has changed. No credit scores, payslips or bank statements are needed because the lender already knows you and your payment record.
What are the advantages and disadvantages of a product transfer?
The main advantages are speed and ease. There’s no legal work required for a product transfer, no affordability checks or significant property valuations.
The main disadvantage is that you’re just looking at one lender, so you may not get the cheapest interest rates on the market. A broker can give you a sense of whether a mortgage product is competitive.
What are the rates and fees for product transfers?
Mortgage rates are always driven by how much equity you have in your property. If your house price has gone up or you’ve paid off a decent amount of your loan, you’ve then got more equity in your house and are a more attractive customer. The lower your Loan to Value ratio, the better the mortgage rates.
Fees vary between lenders: some offer cheaper rates with higher product fees, while others have no fee and slightly higher rates. The deal to choose will depend on your specific situation and what you’re looking for in your mortgage.
When might you choose a product transfer instead of a remortgage?
There are various reasons to do a product transfer rather than a remortgage. The most common is where you’ve had a change in circumstances that could make it more difficult to have your application accepted by a new lender.
If you’re newly Self-Employed or you’ve had a drop in income, you might not pass the affordability criteria and checks with a new bank or building society.
Also, a product transfer can be helpful if time is an issue and you want to switch fast.
What do I need to consider with a product transfer?
If you’re considering a remortgage or product transfer before the end of your current mortgage deal, it’s important to check whether you would face an early repayment charge. These are common with mortgages and can reach 5% of the amount borrowed on your mortgage.
The early repayment fee will usually apply even with a product transfer, so you should avoid switching until the end of the term if possible. Your mortgage advisor can look at the details and recommend the most suitable approach in your situation.
How can GPS Financial help?
We’re experienced mortgage brokers who are here to support you at every step. We work with clients in all areas, from First Time Buyers seeking an Agreement in Principle, through to long standing clients who rely on us to ensure they’re on a competitive mortgage deal.
We’re fully authorised and regulated by the Financial Conduct Authority to help you manage your mortgage and protection needs.