Product Transfer

A product transfer, or rate switch as it is also known, is where you change to a new mortgage product with your existing mortgage lender, once your current mortgage product is due to expire. The products are available either through your mortgage broker or directly with your current mortgage lender.
Whilst a product transfer may appear the easiest way of addressing your re-mortgage review, there are many considerations when deciding whether a product transfer is best for you versus a re-mortgage to a new mortgage lender.

 

Product Transfer

Pros

  • Fast application process (usually online)
  • Choose from a range of products from your current lender
  • No credit check required
  • No property valuation required
  • No legal work required
  • Chose a new product up to 6 months in advance of current product ending

Cons

  • Mortgage terms and amounts usually cannot be changed
  • May not be the cheapest product available to you in the marketplace
  • No advice is given by existing lenders if dealing directly with them

Remortgage

Pros

  • Ability to compare mortgage products from the wider market
  • Extensive choice of mortgage products and options available from competitive re-mortgage market
  • Possible to find cheaper products than those available from the current lender
  • Option to make changes to your mortgage such as increase borrowing increase/reduce mortgage term, add/remove an applicant/borrower
  • Low-cost solutions available from lenders e.g free property valuation and free basic legal package
  • The process can be started 6 months or more before a new product is required
  • Your broker can advise you on a product transfer or a full remortgage
  • The new lender will revalue

Cons

  • Full mortgage application required which includes income assessment and a credit search
  • Property valuation is required which could involve a visit to your property
  • Legal work required to change to a new lender

 

Why use a mortgage adviser?

A mortgage is likely to be your largest financial commitment, and is long-term by its nature, so one small mistake can be very costly. If you speak to a bank about a mortgage, they will be able to tell you about their own product offering however, they will be unaware of their competition and cannot help with trying to find the cheapest mortgage product available outside of their own product range. This is where it can really pay to have a mortgage adviser on your side. With literally thousands of mortgage products available, it can be tricky to know which lender will be best suited for your requirements and help wade through the various different lending criteria to ensure you do not waste your time applying for a mortgage product which may not be available to you. Some lenders offer a lower interest rate mortgage product, however, this could have a product fee ranging from £495 to £1,999 which impacts the overall cost of the mortgage product. A mortgage adviser will be able to recommend the cheapest mortgage product overall, including any product fees, which will save your money over term of the mortgage.

As the name suggests, not only does a mortgage adviser give you advice on the best mortgage product available to you, but they also must document how the lender recommended is the best suited for your needs. This could be as simple as the cheapest product available or it could be that you are due to start a new job in 3 months’ time, with a large pay rise, and you need this new income to qualify for the mortgage so you adviser will recommend the cheapest product from a lender that can accept this new income without even having started the new job role yet!

Your mortgage adviser will have professional financial qualifications and use financial software to make this easier for them. They will also need to know the lending criteria for every lender they have available at their disposal which is no mean feat! An experienced mortgage adviser will have arranged many mortgages (sometimes hundreds per year!) so will be very capable of guiding you through every step of the way to avoid potential delays, pitfalls and also offer solutions to meet your needs and goals for your mortgage requirements.

Some mortgage advisers may charge a fee for their advice so it is worth asking this question before you engage with them but the added value from a great adviser can be worth the fee they are charging.

Why use a mortgage adviser?

To help navigate your way through the each stage of finding the right mortgage. Each person will have different circumstances, brokers will ensure the applicant is matched with the right lender They will suggest the cheapest overall rate which is based on your needs and preferences Brokers will have built up years of knowledge within the industry, so it’s always worth using their expertise.

Product transfer Pro’s

Interest rates can be highly competitive. Fewer fees (compared to a remortgage). With a product transfer you may  have to pay an arrangement fee, but nothing more as legal fees are typically not required . Plus there'll be no exit fee to pay Less paperwork. The process can be relatively straightforward, provided you'e not borrowing more money or changing any of the other terms of your mortgage (such as the length of the term). No affordability check. Lenders will not normally carry out an affordability check if you're borrowing the same amount for the same mortgage term – a boon if you'd struggle to be accepted elsewhere. This also means no mark on your credit file.

Product Transfer Cons

Limited choice. Your lender will likely only have a small number of product transfer deals for you to choose from, so there may not be anything meeting your requirements. No guarantee of getting the best rate. Just because you're an existing customer doesn't mean your lender has to offer you a leading rate. You might get a better rate with a rival lender. Extra checks if changing your mortgage term. If you request a change to the length of your mortgage term as part of the product transfer process, you might have to undergo an affordability check. This is more likely to be the case if you're shortening the term Can't add or remove names from mortgage. If you've got divorced, for example.

Why use a broker?

Your mortgage broker would help you find a lender with the best rates and terms to meet your financial needs A good mortgage broker will be able to explain the different subtleties of various lenders and loan options to you, which could have a significant impact on your finances and save you potentially Thousands of pounds  in mortgage interest. Understand your financial needs and long-term goals Determine how much loan you can afford to borrow (and repay) Establish the best option that suits your financial situation Explain how each home loan works and what each loan costs (including the interest rates, fees, and features) Apply for the mortgage loan and manage each step of the process through to settlement

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