Product Transfer Mortgage
Leslie Alfred and Rebecca Barnes explain product transfers.
What is a product transfer and how does it work?
A product transfer is an alternative to a remortgage. When you come to the end of your mortgage deal, whether you’re tied in for two, five or ten years, the bank sends you a letter to say you’re moving on to the standard variable rate. That’s generally higher than your current rate, so you’ll want to look for a better deal on the market.
A product transfer is where you stay with your current lender. They just transfer you onto a different rate with them. With a remortgage, you take a new product with a different lender.
You might be with Barclays at the moment, and find that Natwest have a better deal – so you leave Barclays and remortgage with Natwest. With a product transfer you’d stay with Barclays on a better or different rate, depending on your circumstances.
Is it better to stay with your existing lender?
It depends on the circumstances. You might find that another lender could give you a much better deal than you’re getting from your current lender. That’s when you’ll probably choose to change lenders and remortgage.
The main reason to stay with the same lender is time constraints. Product transfers are almost instant. You just pick a product and it will move into place once your current product expires.
When would I need a product transfer? Can I transfer early?
You can transfer early. Some lenders allow you to leave your current rate up to two months before it expires. But because rates have increased recently [podcast recorded in January 2023], there’s no benefit in doing that.
If you’re going to a much lower rate, there could be a benefit in transferring earlier. Say you’ve got three years left on your deal – you would have to pay an early repayment charge to leave your mortgage early and remortgage. But there’s nothing to stop you doing a product transfer at any time. It’s just whether it’s beneficial for you – and that’s what a broker can calculate for you. We’ll see if there’s any benefit in you changing your mortgage earlier.
In terms of when you might need a product transfer, it’s sometimes the most suitable solution. An example is if you’ve had a charge of circumstances that means you wouldn’t fit other lenders’ criteria or affordability assessments for a remortgage.
It’s worth noting that product transfers are available on Buy to Let mortgages as well as personal residential mortgages. One advantage of a product transfer with Buy to Let is that you can avoid having to arrange surveys with tenants.
The Financial Conduct Authority does not regulate some Buy to Let Mortgages.
How long does a product transfer take?
It is pretty much instant. It doesn’t take long at all – the longest part about the process is working out which option is the best one to proceed with.
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How much does a product transfer cost?
A product transfer won’t have any solicitor fees because you’ll be staying with the same lender. You won’t have any valuation fees for the same reason. Generally speaking you will just accept the valuation they give you.
If you disagree with the lender’s indexed valuation – perhaps because you’ve had work done to the property – then most lenders will let you pay for a valuation and use that property value instead of the indexed valuation.
Another cost is potentially a broker fee, but at Yellow Brick Mortgages we don’t charge a broker fee for a product transfer.
There may also be an arrangement fee for the product that you’ve selected.
Do you need a credit check for a product transfer?
Not necessarily. The only time a credit check is normally involved is if you’re changing something about the mortgage itself – the term, the borrowing amount or anything along those lines. If it’s just a change in product, credit checks are not normally involved.
Can you cancel a product transfer?
Each lender has its own individual rules. Some allow you to cancel the product transfer up until the day you actually transfer onto the new rate. Sometimes you can choose a product transfer three to six months in advance, locking in that rate. Depending on your lender some allow you to cancel that at any point. Some even allow it ten days after the rate starts. So it depends on the lender – and that’s something a broker can advise you on.
Do I need a broker for a product transfer?
It’s easy to go to your own lender and get a product transfer, but at the same time you’re never sure whether the rate is the best available for you. So it is always best to get specialist advice to help you in that situation.
Think carefully before securing other debts against your home.
You may have to pay an early repayment charge to your existing lender if you remortgage.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
Approved by the Openwork Partnership on Wednesday 22nd March 2023.