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What is a product transfer mortgage?
A product transfer mortgage is where you stay with your current lender when you are at the end of your deal going on or already on their standard variable rate. It may be that you are on another rate (e.g. a tracker product) and wish to move to a fixed rate for more certainty of future payments.
When you approach the end of your deal, it is common to remortgage (moving to a new lender and using their money to pay back your current one) but often your current lender will offer you a selection of products to choose from and if competitive, this would save you the extra hassle in going through a full remortgage transaction.
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Why would taking a product transfer mortgage be easier than changing lenders?
As you are already with the lender, they usually make it a lot less work and sometimes it can be a very simple exercise when taking a new deal. With a full remortgage you would be required to go through full underwriting, this would mean credit checks, getting together all of your documents to be reviewed by an underwriter, your property being valued and then a legal process due to the need to pay back one lender and correctly secure the new mortgage against the property.
With a product transfer mortgage, you are simply selecting a new rate from the current lender. This should then be set up, so it goes live when the old one expires (or sometimes before if the lender allows it and the rate is competitive.)
What are the downsides about taking a product transfer mortgage?
We have looked at the advantages which is mainly the ease of remaining with your current lender rather than going through a full remortgages transaction.
The downside is that you are limited to just that one lender which means a lot less products than if you were searching the entire market. It may be that your current lender has the most competitive products or the difference is not significant enough to justify a full remortgage. There will be many cases though where a great saving can be made by moving to a new lender so it would be worth factoring in the difference in monthly payments and fees and work out whether you can justify moving to a new lender or not.
Another downside is that if you want borrow more money. With a product transfer your lender will only be switching your rate and to apply for additional funds this could mean a new sub account, full underwriting and a different rate on the additional sub account. A new mortgage may be better suited in this scenario.
You should speak to a professional adviser who can look at both options and help you to make a decision.
Will the lender do a credit check for a product transfer mortgage?
Most lenders will not do a credit check for a product transfer mortgage which means more often than not, they will offer you a new rate. This may mean that if you have had some adverse credit in recent years, it may be that you could not remortgage to a new lender for a more competitive rate so sticking with your current lender may be the only choice. If you have been behind on payments with the current lender though, it may be that they will not offer you a product transfer mortgage as a result of this.
All lenders will have different rules here so best to speak to an adviser.
When would my current lender not offer me a product transfer mortgage?
Lenders may not offer a product transfer mortgage for a variety of reasons. An example of these (but not limited to them) as follows:
- The current lender no longer offers new products
- The current lender requires full underwriting for a new product (most don’t but some have required this in the past)
- The current mortgage has not always been paid on time or in arrears now
- The loan to value is too high to be offered one of their products
- The lender believes the terms of the current mortgage have been in breach (for example, a family member has resided in a buy to let so the lender refuses to offer a new product when the mortgage has gone on to the standard variable rate)
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Will underwriting be done when taking a product transfer mortgage?
Usually, underwriting will not be required. All lenders are different though so there have been examples where certain lenders have needed mortgage holders to apply to them from scratch like they are remortgaging so a full application with underwriting, credit checks and documents required to then agree to give them a new product.
Most high street lenders do not do this though and instead offer a selection of products with a less onerous process required to obtain one.
Will a credit check be done when taking a product transfer mortgage?
In most cases no, but like the underwriting question, lenders work differently so some may to get a view of how you have been paying creditors and the debts you have in place before they commit to locking into another product.
If you plan to fully remortgage to take advantage of a much larger market, a credit check will be needed. It’s always wise to know what your credit file looks like so if you would like to see this, visit a leading credit reference agency such as Experian or Equifax or Transunion.
Check My File allows you to view all three of the above credit reference agencies.
What documents would be required for a product transfer mortgage?
For most product transfer mortgages, the lender will not need much in the way of documents, it may be that they just need a rate to be selected and confirmed and then perhaps the mortgage offer / declaration to be signed and returned.
All lenders will have a different requirement for this so your adviser would be able to talk you through the requirements. It may be that your adviser would need certain documents for their own file and to demonstrate they have looked at the full situation before making a recommendation. Your adviser will be able to confirm what is needed.
How far in advance can I apply for a product transfer mortgage?
This depends lender to lender. Some may go as far as letting you apply six months before the current product expires. Some lenders may have a much shorter window, for example around two months so best to check with the lender or your adviser.
Do I need a mortgage adviser to apply for a product transfer mortgage?
Not always but it is recommended that you speak to one. Some lenders may offer the same rates directly to you so it could be a case of going back to them directly. Some lenders will only offer products through brokers so in this case, you may not be able to arrange the new product directly.
It is always worth speaking with a professional adviser first to assess whether you should be applying for a product transfer mortgage or a full remortgage with a new lender.
Should I take a product transfer mortgage?
This is not a simple answer, and it goes back to the need to take professional advice. It may be that it’s the correct thing to do but a professional adviser will take into account your situation, goals, costs and then make a recommendation accordingly which could be a product transfer mortgage or moving to a new lender.
Are product transfer mortgages available for both residential and buy to let mortgages?
Yes, with most lenders anyway. In the same way that you may not want to move lenders each time you want a new deal with a residential mortgage, this is the same for buy to let.
Switching products on a buy to let mortgage is also a simpler exercise than moving to a new lender for the same reason as the residential mortgage, full documents would be required on the remortgage along with credit checks, underwriting, valuations and legal services.
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Conclusion
Product transfers can be the ideal solution to get you on an interest rate that is more favourable than your current lender’s standard variable rate, it should also be less hassle than remortgaging. It may be though that their products are not as competitive as others that you qualify for so taking advice with an adviser is always recommended. If you would like I NEED ADVICE to put you in touch with an adviser that can compare product transfers vs a remortgage, please complete the contact form.
The information on this page is not tailored to any individual readers and should not be considered financial advice under any circumstances.
If you are seeking advice about a mortgage, you should consult a qualified professional.
