What is a Product Transfer Mortgage
1. Definition of Product Transfer
A product transfer mortgage means you can switch your mortgage deal with your existing lender. You can achieve this without going through the hassle of switching to a new provider. This option can be particularly useful if your situation has changed since you originally obtained your mortgage.
If you just became self-employed, you may not have the requisite number of years of financial records for a new mortgage. In the latter situation, sticking with your original lender might be a good tactical move. This mortgage transfer gives you the ability to keep your existing terms.
At the same time, you’re locking in a new rate, which usually saves you time and money during the process.
2. How It Differs from Remortgaging
While product transfers and remortgaging may sound alike, they address different customer requirements. Either option allows you to lock in a new rate for your home loan. Unlike with a product transfer, when you remortgage you move your mortgage to an entirely new lender.
Remortgaging can bring more competitive rates but usually requires you to pay extra fees and complete extra paperwork. An in-product transfer, on the other hand, can be less complicated and offer a more direct path with fewer obstacles.
Reserving a deal as far as three months in advance of your current one’s expiration allows you to plan ahead and be ready. Watch out for stacking offers, they could lead to extra fees.
3. Common Misconceptions
Most people believe this to be true. If a product transfer gives you £53 a month more, that’s £1,272 saved after two years. That’s a lot of money to increase your financial security!
It’s important to remember that changing products can result in early repayment fees. Opening up discussions about your available mortgage options six months in advance of your fixed rate’s expiration will help you avoid any nasty surprises.
How Product Transfer Mortgages Work
1. The Application Process Explained
Product transfer mortgages are a simple option for borrowers who wish to continue their business with their existing lender. This process includes choosing a new mortgage product, typically a fixed rate mortgage, while keeping your loan amount and term the same.
A lot of people love the process because it’s quick, often closing in as little as three days. It’s a simple process to begin – just reach out to your lender, tell them you’re interested and want to explore your options.
Imagine this—there’s a much better offer but you can’t be bothered to switch. No more faffing about with full documentation or a complex valuation usually involved with a lender switch.
Mrs. Brown is all the evidence we need that good financial decisions are rewarding. By opting for a product transfer rather than looking for new lenders, she saved thousands.
2. Criteria for Eligibility
Eligibility depends on some important factors. If your mortgage agreement is set to expire within the next six months, it’s time to get moving!
Act now to escape costly higher interest rates down the road. If you’re currently happy with your existing lender, it can save you a lot of money – potentially £1,000s over the term of the mortgage.
If you re-fix within 14 days of the end of your rate you can incur an early repayment charge. Keep in mind that this fee can be very expensive.
Therefore, timing and verifying your lender’s requirements are both key in figuring out if you’ll qualify and save money.
3. Steps to Complete the Transfer
The transfer process usually takes two to three months, but the savings can be significant. Start by getting a full understanding of your existing deal and shopping around for new products with your lender.
The time to move is now, and that six-month clock is already ticking. Even a £1,000 fee still results in a savings of 4.5%.
Our step-by-step process takes the hassle out, making sure you get the most financial benefit while keeping everything smooth and headache-free.
Benefits of Product Transfer Mortgages
Simplified Process
Changing your mortgage product with your existing lender usually simplifies the process. You don’t increase the loan amount or change the mortgage term, so it’s usually a speedier process.
We’ve had a number of homeowners report back that they were able to switch deals in a matter of days. This quickness is in stark contrast to remortgaging which can take two or three months.
By opting for a product transfer mortgage, you save yourself the hassle of searching for the best rates. You are able to lock in a new agreement — generally at a fixed rate — with your existing lender.
The cherry on top? Outsmart the pros. You leave this one to the pros for free.
Potential Cost Savings
When you go with a product transfer, the savings can be huge. Stay with your existing lender but cough up a fee of up to £1,000.
You would be saving an average of 4.5% over time! Making the right choice here can save you thousands of pounds over the course of the mortgage.
For borrowers who can’t be without a better deal and don’t want to go through a long remortgaging process, it’s a smart choice. The long-term savings of remortgaging can be bigger, but the short-term advantages of a product transfer are difficult to beat.
Maintaining Existing Relationship with Lender
There are benefits of holding onto your mortgage with your current lender. One, you already know the lender, and there’s a lot of comfort in that familiarity.
The team at UK Moneyman are experts at providing an excellent service with no fuss and no judgment. They do the best job they can to stand behind their customers.
Their personable and professional demeanor throughout the process eases any anxiety or stress, which is invaluable.
Drawbacks of Product Transfer Mortgages
Using a product transfer mortgage feels like sometimes entering a funneling hallway.
1. Limited Product Options
When you choose a product transfer, your options are reduced to just a few. Remortgaging creates a big opportunity for more lenders and better deals to come flooding in.
By comparison, if you stay with your current lender you’re stuck taking whatever they give you. This may untether them from making potentially more advantageous deals across the aisle.
When you sacrifice flexibility, you create a skinnier market. This puts you in a catch-22 where your options are limited to the more expensive options that do not suit your financial requirements.
2. Potentially Higher Rates
Product transfer mortgages typically have a hidden cost—higher interest rates. Once your fixed-rate deal expires, you might find yourself on your lender’s Standard Variable Rate (SVR) before you can blink.
This rate is almost always worse than your existing one. In reality, however, you could be spending an additional £600 a year.
This increase might result in larger monthly repayments, making it more difficult to manage your finances. Without the ability to renegotiate terms, these higher rates may seem like an irreversible trap.
3. Restrictions on Additional Borrowing
Product transfers generally maintain the original loan amount and mortgage term, which can speed up the process but limit flexibility. You can’t just borrow a bit more money if unexpected expenses come up, since lenders have a habit of enforcing rigorous equity standards.
This rigidity and lack of flexibility can be really limiting. It is particularly harmful to borrowers who are seeking to raise their mortgage and access more of their property’s value.
Just to reiterate the FCA’s own findings from as recently as 2018, about the plight of borrowers who feel cornered by their situation.
Key Considerations Before Transferring
1. Evaluating Current Lender Offers
If you’re looking to make a product transfer, be sure to take a look at what your existing lender has to offer. Existing lenders usually offer easier processes because they have a history with your financial and property situation. That familiarity can mean saving time and headache.
Before you jump on any of these offers, as convenient as they might sound, you’ll want to consider a few things. At first glance, a 4.1% deal looks great. With expensive hidden fees it might end up costing you more than a 4.5% offer over two years.
Tip: Never forget to consider the whole cost, especially if there are application fees, which can be up to £2,000.
2. Understanding Cancellation Policies
Before you transfer, make sure you know any cancellation fees that are associated with your current mortgage agreement. If you choose to move to a new deal with a lower rate following these improvements, expect to pay an early repayment charge.
Their charge can easily amount to thousands of pounds. This fee is often a major dealbreaker, so consider it in the balance against the advantages of any new offers. Understanding these policies allows you to make the right choice for you without incurring any surprise charges.
3. Assessing Affordability for Extra Borrowing
Think about your future need for more borrowing and whether that will be affordable for you. A larger LTV will reduce available options, or at least raise the rate on the highest LTV you qualify for.
If you are in full-time employment and have no payment arrears, you typically meet the criteria to do a mortgage product transfer. You must be less than 70 when the loan matures.
Consider your funding needs and long-term fiscal health before taking on additional debt.
4. Impact on Interest Only and Offset Mortgages
If you have an interest-only mortgage or an offset mortgage, find out how a transfer will affect your deal. These kinds of mortgages come with strict stipulations and transferring may change your financial obligations significantly.
Consider the impact carefully to make sure it fits within your fiscal plan. Most providers will let you move to a better offer at least three months out from your current deal expiring.
This can provide you with a lot of useful flexibility.
Factors Influencing the Transfer Process
1. Credit History and Payment Record
Credit history has a major impact on product transfer mortgages. Lenders are going to look very closely at your credit history to see how you have financially progressed through the years. Having a good payment history will increase your likelihood of a successful transfer.
Lenders will look at your credit score. They’ll take into account your annual income and monthly expenditures to calculate how comfortably you can afford to pay more toward your loans. Having a good payment history helps ensure a smoother transfer experience.
This means lenders take a number of additional steps, which they don’t take for traditional residential mortgages. A higher loan-to-value (LTV) ratio can restrict your choices or affect your rate.
2. Minimum Loan and Term Requirements
Each lender imposes its own requirements on loans and terms. It’s common for lenders to allow you to initiate the transfer process three to six months before your current deal ends. Having the minimum loan amount and term criteria is huge.
A complete financial check ensures the new terms being presented make sense and are affordable for you. For example, if you get a mortgage offer with a 4.5% fixed rate and £1,000 fee, there will usually be an early repayment charge.
This penalty can be a very pricey charge, potentially costing you hundreds of pounds.
3. Procuration Fees and Revaluation Needs
Additional layers to the transfer process include procuration fees and revaluation of the property. Truth is, paying these fees out of pocket upfront will adversely affect your ability to receive better rates in the long term.
Many lenders will not refund those fees if a better rate becomes available. A revaluation may be required to establish the property’s current value, affecting the terms or qualification for some products.
Once you grasp these factors, you’ll be able to make smarter choices throughout the transfer process, weighing costs against their benefits to minimize surprises.
Reasons to Choose a Product Transfer
1. Convenience and Speed
Moving to a product transfer is a quick and easy step. Most lenders allow you to transfer your deal before it expires. That way, you avoid having to go through the burden of eminent domain legal filings and private property appraisals.
You can complete the transfer in as little as three days and without increasing the loan balance or mortgage term. This simple, speedy process will buy you loads of time. Move to a 4.1% fixed-rate deal with a different lender and save £23 per month.
That’s £550 in total savings over two years! This points to the efficiency and convenience of product transfers.
2. Avoiding Additional Fees
The biggest benefit of a product transfer is avoiding additional expenses. By moving to a different deal before your current deal ends, you avoid any early repayment charges that may apply.
When you inquire with your lender about potential deals, you can save yourself from overpaying. The majority of product transfers come with a better rate than their standard variable rate (SVR).
That translates into putting more money in your pocket each month! If you just stay with your existing lender, you would save £53 a month over the next two years. That’s a significant savings, and without any new surcharges to boot!
3. Simplifying Financial Management
Product transfers make your financial bottom line much easier to manage. By simply sticking with your current lender, you’ll have much less disruption and confusion, keeping everything clear and consistent with your mortgage.
That consistency makes it more simple to keep track of your finances, taking the worry out of suddenly needing to adapt to new terms or conditions. It can be thousands of dollars cheaper to switch to a better deal.
It offers security and financial certainty without the trouble of having to switch to a new lender.
Advice on Applying for a Product Transfer
1. Tips for Successful Application
When applying for a product transfer, timing is key. Many lenders, such as Coventry Building Society, allow you to start the process at least three months before your current deal ends. Some even permit up to six months in advance.
This early start gives you a better chance to secure favourable terms. Our mortgage team here offers a stress-free application process, handling the transfer for you at no cost. This service ensures a smooth transition without the need for solicitors or property valuations, as Coventry Building Society has already assessed your financial situation.
2. Consulting with Financial Advisors
Having a financial advisor by your side makes the process clear and empowering. They can help you determine if staying with your current lender or transferring is in your best interest.
For example, if you’re currently on a fixed rate, advisors could look at other options such as a second charge mortgage. This option, called a home equity loan, might be a cheaper alternative even if you’re still in your fixed-rate term.
In general, we recommend consulting at least six months before your current deal ends to leave enough time to fully investigate all of your options.
3. Comparing with Remortgage Options
It’s always a good idea to compare product transfers with remortgage options. Let’s say you’re looking at a new two-year fix. You’re looking at a 4.1% fixed rate with £2,000 fee through a new lender.
Simultaneously you have to compare it against that 4.5% fixed rate with a £1,000 fee from your existing lender. A product transfer is easier because no further evaluations are needed.
Remember that once a deal is reserved, changing plans can be complicated and costly if within 14 days of the new rate starting.
Frequently Asked Questions
What is a product transfer mortgage?
A product transfer mortgage is when you switch to a new product with your current lender. It’s a great way to modify your mortgage terms without having to switch to a new lender.
How does a product transfer mortgage work?
You reach out to your existing lender to check out some new mortgage products. You can convert to a different rate or term without going through the full application process that new mortgages have to go through.
What are the benefits of a product transfer mortgage?
The chief advantages are convenience and expediency. No new property valuation or legal fees are required. It saves consumers the stress of having to switch lenders.
Are there any drawbacks to a product transfer mortgage?
The downsides include savings that are lost by not taking advantage of better offers available in the market. You’re stuck with the products your current lender has in house.
What should I consider before transferring my mortgage?
Look at interest rates, lender fees, and your personal finances. Shop around and make sure the new deal supports your overall financial objectives.
Which factors influence the mortgage transfer process?
What matters is your current mortgage terms, your credit score, and what your lender is willing to offer you. Timing and available product options are key.
Why should I choose a product transfer mortgage?
Select it for convenience and speed, particularly if you’re happy with your lender’s service. It serves as a great solution when you want to bypass the hassle of moving to a new lender altogether.