Product Transfers Explained
If you have a mortgage with a product term expiring soon, you may be wondering what your options are. In most cases, people opt to remortgage when one product ends to secure a new deal with another lender. This is because remortgage products are typically more cost-effective than product transfer options.
Product transfers are similar to remortgaging, but you stay with your current lender. In some instances, a product transfer may be more suitable than a remortgage when your product term expires.
This guide explains product transfers and remortgaging in detail to help you make the best choice for your circumstances.
What is a Mortgage Product Transfer?
Lenders offer mortgage products that have an expiry date. For example, your lender might offer fixed rate products with terms of 2,3 and 5 years.
When the product expires, if you do not remortgage or product transfer, your mortgage reverts to the lender’s Standard Variable Rate (SVR).
A SVR is set at the lender’s discretion and is largely uncompetitive compared to the range of deals available. For example, your SVR may be 9% whereas you may be able to remortgage onto a product with a 6% initial interest rate.
With a product transfer, instead of remortgaging and switching your mortgage to a different lender, you stay with your current lender and take another mortgage product. This product then begins when your former product expires, which avoids your mortgage reverting to the SVR.
How do They Work?
When your mortgage deal is set to expire, your lender and mortgage broker will get in contact with you to discuss your options.
Typically, your lender will send a letter advising you of your expiring product and present the option of a product transfer. This letter will also outline what happens to your mortgage if you fail to product transfer or remortgage and highlights the SVR you will be charged.
If you used a broker to arrange your mortgage, they will normally contact you by telephone and discuss your current situation before recommending either a product transfer or a remortgage. In all scenarios, you should discuss your options with a whole-of-market mortgage broker, like Boon Brokers, instead of your existing lender. Boon Brokers is different to most intermediaries when it comes to contacting clients when their mortgage products are due to expire. Our automated system will send you a text, e-mail and postal letter 6 months before your product expires. A broker will automatically be assigned the product review as an actionable task, and they will quickly be in touch with you to ensure that an offer is secured as soon as possible.
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What’s the Difference Between a Product Transfer and Remortgage?
With a remortgage, you apply with a different lender to secure the new mortgage. As a result, you are essentially going through a full mortgage application again and the new lender will need to conduct all the checks your original lender did when you took out the existing mortgage.
A product transfer is with the same lender, so they already have your personal details and they have already ascertained that your property meets their criteria. With a product transfer, you do not need to worry about providing the level of information and documentation that would be requested if you remortgaged with a different lender.
Benefits of a Mortgage Product Transfer
There are several benefits to a mortgage product transfer:
- You avoid the uncompetitive SVR
- Your new deal will be cheaper to set up, often with no upfront fees
- Product transfers can be offered and completed on the same day compared to the standard 6-10 working days that it often takes to generate a remortgage offer
- There is no legal work required for a product transfer, unlike a remortgage which requires solicitor involvement
- If your property or mortgage is unusual and your original lender was flexible with property criteria, you may not be able to remortgage elsewhere
This last point is important. When your broker compares the market, they may find cheaper mortgage deals and still recommend a product transfer. This may be the case if your existing lender is best suited for your circumstances.
Unusual Property Types
Each lender has different property requirements. Most lenders only accept properties of standard construction (i.e brick or stone walls and slate or tile roofs).
However, there are lenders who are more flexible around unusual properties. If your property falls into this category, you may find that a product transfer is the only option for you.
Self-Employment and Limited Company Directors
Some lenders are strict on how they assess income for self-employed individuals and directors who own more than 25% of a limited company.
Once again, there are lenders who are more flexible in their approach to income requirements, but you may find that your income makes a product transfer preferable.
For example, some lenders only require one years’ accounts whereas others will ask for much more detailed accounting history and take an average of your income over a few years.
If you have only recently started in a self employed capacity and are unable to remortgage as a result, a Product Transfer is likely to be most suitable.
Disadvantages of a Mortgage Product Transfer
In general, it is only best to stay with your existing lender if your circumstances mean you cannot remortgage elsewhere, or that your lender is offering the best product.
In most cases, your broker will be able to source a better deal with another lender and the savings of that deal will normally sufficient to make any remortgaging fees negligible.
A product transfer should never be taken in isolation. You should always check the other deals available on the market and compare your product transfer against them.
Having a whole of market mortgage broker with a large panel of lenders available is invaluable as they will be able to source the best deal for you.
Mortgage brokers can also arrange your product transfer and often access exclusive deals that are only available to intermediaries. They will not hesitate to recommend a product transfer if they are the best option for you.
What Our Clients Have To Say
Should you go Direct to your Lender for a Product Transfer?
No, you should not go direct to your lender for a product transfer. Whole of market mortgage brokers will have the same product access as your existing lender, but there are many other benefits of proceeding with a broker.
Some benefits of using a Whole of Market Broker for a Remortgage or Product Transfer are:
- Fee-Free (with Boon Brokers, no fee is charged at any stage)
- Access to Whole of Market Mortgage Products (not just those offered by your existing lender)
- Future Remortgage Tracking (with Boon Brokers, our system automatically tracks your product to ensure that you are on the best deal when your product expires)
- No hassle (a broker will handle the paperwork for the application and correspond with the lender on your behalf)
In addition, if you form a strong working relationship with your mortgage broker, they will be able to assist you for all future remortgage/product transfer cases.
Speak to a Specialist
Boon Brokers is a Whole of Market Mortgage, Insurance and Equity Release Brokerage. Boon Brokers offers fee-free remortgage and product transfer advice. Contact us today to book your free consultation and find out if a product transfer or remortgage is the best option for you today.