Product transfer mortgages have become more popular in recent years. Reports by UK Finance show that in 2023, 88% of homeowners preferred product transfers over external remortgaging due to affordability constraints.
A product transfer is an easy and cost-effective way to get a new deal on your mortgage.
A mortgage is one of the most expensive investments, and accessing the most competitive deals can help you stay on top of your finances.
A product transfer is usually quick to complete and can help you save money and avoid the complications of remortgaging.
Here’s everything you need to know about product transfers to help you determine whether it’s a smart move.
What Is a Product Transfer Mortgage?
A product transfer mortgage involves changing your current mortgage deal with the current lender instead of remortgaging with a different lender.
If your current deal is about to end and your lender has advertised a new rate or deal with a cashback incentive or lower fees, you may want to consider transferring your mortgage.
A product transfer can help you avoid rolling onto the lender’s standard variable rate, which is usually higher.
You can also ask the lender what other deals they have and switch to them to avoid paying higher on the standard variable rate.
How Does a Product Transfer Mortgage Work?
Product transfers are usually quick and straightforward to complete if the amount borrowed remains unchanged and you’re not revising the mortgage terms.
Some homeowners can switch their deal in a few days if the mortgage term and loan amount don’t change.
You can switch to a better agreement quickly because most product transfer mortgages don’t have any complexities.
Unlike external remortgages, such agreements don’t involve measures like eligibility assessments or house valuations, helping save a lot of time and avoid legal red tape.
The lender will also not conduct a credit check since you’re not changing the terms of the mortgage agreement. This can be beneficial if your circumstances have changed from when you initially took out the mortgage.
What Are the Pros and Cons of a Product Transfer Mortgage?
Weighing the pros and cons of product transfer mortgages can help you determine whether it’s the best option for you.
Pros of Product Transfers
- Highly Competitive Rates – You can access better rates with a product transfer mortgage, as some lenders reserve the best deals for their existing customers.
- Fewer Fees than A Remortgage – With a product transfer, you can avoid legal fees since you don’t need the services of a solicitor. You also don’t need to worry about valuation fees or exit fees, which are common in remortgages.
- No Affordability Checks – If you’re not borrowing more money or changing the terms of the mortgage, the lender will likely not perform any affordability checks. It can be helpful if you’re struggling to be accepted elsewhere and will not leave a mark on your credit report.
- Less Paperwork – A product transfer features less red tape and can be relatively straightforward, provided you’re not changing the mortgage terms or borrowing more money.
- Quick and Easy Applications – You can easily do a product transfer online or over the phone, and acceptance can take a few hours or days. Alternatively, you can use a mortgage broker to arrange the deal.
Cons of Product Transfers
- The Best Rates Aren’t Guaranteed – You shouldn’t simply take up your current lender’s offer without checking for better deals elsewhere. Your lender doesn’t have to offer you the best deal simply because you’re an existing customer, and you can find better rates with rival lenders.
- Limited Choices – You may not find a deal that meets your needs or requirements since your lender can have a limited number of product transfer deals to choose from.
- Can’t Borrow More – You’ll not be able to borrow more money or change the term of the deal with a standard product transfer. If you’re refinancing with your current lender to borrow more, it will be a different product transfer called a further advance, which involves more eligibility assessments.
How Do You Compare Product Transfer with Remortgage Deals?
You can compare product transfers with remortgage deals through the following steps:
Step 1 – Determine Your Current Lenders Best Deals
Find out the product transfer rates your current lender is offering by asking them about all the deals they’re offering.
Step 2 – Determine What Deals You Can Get from Other Lenders
Finding out what other lenders are offering allows you to evaluate your options and determine which one is better suited to your circumstances.
A mortgage broker can help you search the entire market to determine what’s available.
Some brokers offer access to exclusive deals and can advise you on lenders who are likely to accept your request or the products that have the features you’re looking for.
You’ll be in a better position to determine which option is better for you after determining how deals from other lenders compare to deals from your current lender.
In some situations, a product transfer will make more sense even when you find a better rate with a different lender.
For example, if you don’t want to go through the entire remortgaging process, including affordability checks and paperwork, a product transfer with slightly worse rates can still be suitable.
What Fees Will I Pay with A Product Transfer Mortgage?
Although product transfers don’t feature as many fees as remortgages, you’ll likely still pay an arrangement fee. Most lenders allow you to choose how to pay the fee.
You can pay it upfront if you have the cash and avoid paying any interest on the fee. You can also add it to your mortgage balance.
However, this will increase your monthly repayment slightly since you’ll be paying off the fee plus interest.
Final Thoughts
Product transfer mortgages can offer various benefits and help streamline the refinancing process. However, it also features a few drawbacks you must consider before deciding.
Whether or not a product transfer is the best option for you will depend on your circumstances and personal situation. Ensure you shop around and use a mortgage broker to get access to numerous deals available in the market.
Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.
