If you want to switch your mortgage deal to a new one, you don’t need to change to a new lender to do this. Instead, you can take advantage of a product transfer with your current lender. This is usually a quick and easy process that can be cost-effective compared with a remortgage.
What is a product transfer?
A product transfer allows you to switch your current mortgage deal to a better one with the same lender. Your fixed-rate deal may be coming to an end, for example, and you don’t want to be put on your lender’s standard variable rate (SVR), which is likely to be more expensive. Or you may have noticed that your lender is offering a new deal with a more competitive rate than the one you’re paying.
This is different from a remortgage, which is when you take out a new deal with a different lender. As long as you’ve been maintaining your mortgage payments, you should be eligible for a product transfer.
How does a product transfer work?
As you’re dealing with the same lender, a product transfer is a straightforward process that’s quick to do. You have already been approved for your mortgage loan so there are no new affordability or credit checks and no need for a valuation of your property, saving you both time and money. No underwriting process has to be carried out and there’s usually no need to pay legal fees either.
When opting for a product transfer, you won’t have to pay an early repayment charge. This exit fee is payable, however, when remortgaging and it can be very costly. Some lenders do charge an arrangement fee for a product transfer, which can usually be added to your loan. Other lenders don’t charge a fee for this, helping you to save money compared with a remortgage.
How does a product transfer compare with remortgaging?
Overall, the ability to save time and money with a product transfer makes it a convenient and cost-effective choice. However, not all lenders offer the best deals to their existing customers — these can often be reserved for new customers. In this case, you may find much better deals being offered by other lenders, making remortgaging a more attractive option.
Cost
When comparing costs, weigh up the differences between what you can save on fees with a product transfer and the lower interest rates available for remortgage deals. Having a lower interest rate not only means that you’ll pay less each month but you’ll pay less for your mortgage loan overall.
Time
If saving time is a key factor for you, then a product transfer is the best choice. For example, your current deal may be about to end and you need to arrange a new deal quickly to avoid paying your lender’s SVR. However, if you’d rather take your time to compare deals that have better rates and terms and you’re not in a rush for it to be processed, then a remortgage is a good option.
Choice
As mentioned above, remortgaging offers you a wider choice of deals from various lenders. You may find better rates and more flexible terms. Or you may simply be unhappy with your current lender and wish to change. When opting for a product transfer, there may be a limited choice available from your lender.
Situation
If your credit score has gone down since you took out your mortgage, a product transfer makes more sense. This is because the lender is unlikely to carry out a new credit check. Likewise, if your financial situation has changed for the worse, you don’t need to worry about passing new affordability checks with a product transfer. You just need to make sure that you’ve kept your monthly mortgage payments up to date.
There are times when a remortgage may be better suited to your circumstances. For example, you may wish to borrow more to carry out home improvements, to consolidate some debts or to make an expensive purchase. If you want to borrow more with your current lender, you’ll need a further advance instead. Unlike a remortgage, this is a separate loan to your mortgage with a different interest rate and end date.
The pros and cons of a product transfer
At a glance, here are the pros and cons to consider for a product transfer.
Pros
- There’s no need to shop around trying to find a deal with a new lender.
- It’s a hassle-free process as you don’t need to go through the normal application process that usually applies for getting a mortgage.
- As you’re simply switching to a new deal with the same lender without changing your borrowing requirements, it’s a very quick process.
- Cost-effective. The fees for a product transfer are considerably less than those payable when remortgaging. This can make it a cheaper option in that respect.
- Money-saving. You may be able to find a better rate when switching to a new deal with your lender compared with the one you currently pay or compared with the lender’s SVR.
- Peace of mind. If you’re happy with your current lender, staying with them provides reassurance and stability.
Cons
- Higher interest rate. Lenders don’t necessarily offer the best rates for existing customers, tending to save those to entice new customers. This means that you may end up paying a higher monthly interest rate than if you shop around and opt to remortgage. Finding a better deal elsewhere may enable you to benefit from reduced monthly mortgage payments.
- Limited choice. There will be a small number of deals to choose from. This means that a product transfer may not entirely meet your needs.
- Lack of flexibility. With access to the limited product transfer deals offered by your lender, you can miss out on more flexible terms offered by other lenders.
- Inconvenient with extra costs to borrow more. If you want to borrow more with your current lender, you’ll need a further advance. This means that you’ll then be paying for two loans with two separate interest rates and end dates.
- Doesn’t take your current circumstances into account. As a straightforward ‘execution only’ transaction, you don’t benefit from advice from your lender when taking a product transfer. As such, it doesn’t allow for a change in your situation since first taking out your mortgage. Staying with your current lender may not, therefore, be as beneficial for your circumstances as it was before.
We can find the best deal for you to switch to
If you’re looking for a convenient, fast and hassle-free way to change to a new deal, a product transfer with your current lender is an ideal choice. Whilst you can apply for a product transfer easily by telephone or online, you won’t benefit from any independent advice. Our mortgage brokers can check the deals offered by your lender to ensure that their rates and terms meet your current needs.
So that you can be sure you choose the right deal, our mortgage experts will also explore other options for you. Aside from comparing the interest rates and flexibility of different lenders’ terms, they’ll weigh up the costs, both upfront and overall, any time constraints you may have and your current circumstances. This will help them ascertain whether a product transfer is best for you or if a remortgage will be more beneficial. Call us on 01322 907 000 for impartial mortgage advice with the potential to save you both time and money.