What is a product transfer mortgage and is it better than a remortgage?

In this article, we explain what a product transfer is and how it works in comparison to a remortgage. We also explain the pros and cons of a product transfer vs a remortgage and how to get help arranging your new mortgage deal.

What is a product transfer mortgage?

A product transfer is a process of switching from your current mortgage deal that has expired to a new deal with your existing mortgage lender. A product transfer mortgage can have many benefits as long as your lender offers competitive interest rates compared with other mortgage deals available to you. If you reach the end of your fixed-term deal and do not remortgage then you will normally start paying your lender's standard variable rate (SVR) of interest - this is usually higher than the interest rates you could secure with a fixed deal.

How does a product transfer mortgage work?

A product transfer mortgage simply allows you to transfer from an existing mortgage deal to a new mortgage deal with the same lender. Most mortgage deals are fixed for a specific term - you may have chosen a fixed-rate or tracker mortgage deal over 2, 3, 5, 7 or 10 years. It is possible to get longer-term mortgage deals too and some can even be fixed for the entire mortgage term, although this is rare.

Once your mortgage deal expires, your lender will start charging you the standard variable rate (SVR) of interest unless you switch to a new mortgage deal. Your lender's SVR is usually a higher rate of interest than you can get by switching to a new deal. In this situation, you have two choices; switch to a new mortgage deal or remain with your lender's standard variable rate mortgage.

Sometimes, borrowers choose to stay on the standard variable rate instead of locking in a new mortgage deal. It might seem counterintuitive given you are likely to pay over the odds on a standard variable rate. But, in doing so, you are allowing yourself the flexibility to fix a rate when you find one that suits you best - you may not like the deals open to you right now and you may believe that a better mortgage deal is on the horizon.

If you fix a new deal but a better rate comes along, it is unlikely that you will be able to switch without paying an early repayment charge (ERC). Therefore you should consider whether a fixed deal is the best choice for you prior to switching. To get some market insight and useful guidance, you should contact a mortgage expert* who doesn't charge any fees.

Product transfer mortgage vs remortgage

	Product transfer	Remortgage
Pros	Fees usually smaller Valuation not needed Fast application No legal fees No credit check Earnings evidence not needed	Wider choice of mortgage deals Possible lower interest rates/mortgage payment Increased equity/lower LTV considered Option to borrow more Option to reduce or increase the term of the mortgage
Cons	Limited to mortgage deals offered by the existing lender Lack of valuation may not reveal a lower LTV for a better deal Mortgage term and amount generally does not change	Longer application process Earnings evidence required Valuation required Legal fees applied Lender fees are more likely

Individual lender's mortgage contracts may vary and the above is a general view of product transfers and remortgages

Things to consider before committing to a product transfer

1 - Compare mortgage deals

Before you commit to a product transfer, it is wise to take a look at what mortgage deals are available in the open market with other lenders. You can check these quickly and easily using our mortgage rate comparison tool where you can search fixed-rate and tracker deals for fixed periods of between 2 and 10 years. If you find a deal that looks better than the best deal offered by your current mortgage lender then you should weigh up the cost savings against the time, money and effort that may be required in order to switch mortgage lenders.

2 - Speak to a mortgage broker

If you don't have a mortgage broker, you can find a mortgage broker or contact Habito* - an online mortgage broker that searches over 90 lenders' mortgage deals and can provide you with tailored mortgage advice. Your mortgage broker will be able to compare deals for you and use their insights to steer you on which options to choose. Some mortgage lenders, including Habito, won't charge you a fee as they are paid by the lender so you could save money without having to spend on mortgage broker fees. We've vetted the service provided by Habito and have found the mortgage advisers are knowledgeable and the process is simple and fast to use.

You can also find a mortgage broker in your local area through the VouchedFor* website which lists professionals around the UK based on user reviews.

How to arrange a product transfer

A product transfer is fairly simple to arrange and you can do this either with your lender directly or through your mortgage broker*. The application process is simplified by the fact that your lender has previously assessed your home, personal circumstances and financial evidence. Therefore, your lender is unlikely to request a valuation of your home, evidence of your earnings or a credit check, saving you time and money. You will need to complete a product transfer application which will be a shortened mortgage application - the turnaround on this is usually 1-2 weeks depending on your mortgage lender's work queues. Once accepted, your mortgage will be switched over to the new deal and your monthly mortgage payment will be changed in line with this.

 

 

If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. The following link can be used if you do not wish to help Money to the Masses or take advantage of any exclusive offers - Habito, Vouchedfor