Do you need to make a decision about changing your mortgage?
Are you looking for ways to save money on your monthly mortgage payments? If so, you’ve likely considered either a mortgage product transfer or a remortgage.
But what exactly is the difference between these two options, and which one is right for you? In this article, we’ll dive into the intricacies of both, to help you understand the pros and cons of each option so you can make an informed decision.
So, buckle up and get ready to learn about the mortgage refinancing strategies available to you.
To keep your mortgage running smoothly, it may occasionally need some tweaks and changes. These may be quite simple such as adjusting the mortgage term, or maybe looking into a new interest rate.
But often there’s a requirement to:
- borrow more money,
- add someone to the mortgage
- or reduce the monthly mortgage repayments
Some of these you can do with your existing lender, but often a better deal is available when you move your mortgage to a new lender.
Let’s see how it works.
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What is a mortgage product transfer?
A mortgage product transfer is the process of switching your mortgage over to a new interest rate, without changing your lender. It’s a bit like remortgaging, but simpler and quicker.
Let’s say that you had a 1.99% fixed rate from Halifax that was due to end in a few months time. Halifax would write to you beforehand, letting you know that the fixed rate is finishing and offering you some other rates that you could switch to. This would be a product transfer.
You would move from one Halifax fixed rate, over to another Halifax fixed rate.
You can agree a product transfer from up to three months before your current ends, and some lenders will allow this up to six months before. You won’t be borrowing any extra money, so your mortgage balance won’t change.
On the agreed date your lender will adjust your monthly repayments based on the new deal.
For more information about the process you may like to read – What is a product transfer mortgage? or How long does a remortgage take with the same lender?
What are the main benefits?
There are quite a few benefits when choosing a product transfer over a remortgage.
SPEED – They are much quicker than remortgaging.
FEES – Overall the fees are normally lower.
LEGAL WORK – No need to use a solicitor.
PAPERWORK – Much less paperwork than a remortgage.
INCOME PROOF – Not normally needed.
CREDIT SEARCH – Not normally needed.
VALUATION – No need for a property survey or valuation.
UNDERWRITING – Underwriting is not required.
Other considerations
While the list of benefits above is impressive, there are some things that a product transfer can’t do.
Here are a few things that you should be aware of:
Getting the best deal
By accepting one of the products offered by your current lender, you may not have the best deal.
A mortgage is a large financial commitment, so ask a mortgage broker to compare your product transfer options to those available in the whole mortgage market, just to double check.
Limited options
There’s not a lot of options available when you do a mortgage product transfer.
Extras like offsetting or overpayments may only be available from different lenders.
No capital raising
A product transfer is just that, moving from one rate to another.
So you can’t borrow any extra money and will only be able to move your current mortgage balance over to a new deal.
Cannot change the borrowers
There are times in the life of a mortgage where there is a need to change the borrowers. Perhaps adding someone, or removing someone.
This is not possible with a product transfer but changes can be made with a transfer of equity remortgage.
What is a remortgage?
Depending on how long you have been a homeowner, it’s possible that you have never applied for a remortgage. Particularly if you have previously chosen the product transfer option above.
Remortgaging is the process of moving your whole mortgage from your current lender over to a new lender.
This does mean applying for a new mortgage, so it can be more time consuming. But, unlike the product transfer, you do have the option of borrowing more money at the same time, by applying for a larger remortgage. One benefit of this is that the entire mortgage can be included in the new interest rate deal.
You don’t have to borrow any extra though. You can apply for exactly the same amount, or even a lower figure, if you have some spare savings.
There are many acceptable reasons for wanting to remortgage.
A remortgage can be used to borrow more money by accessing the increased equity built up in your home. The money raised can be used for many different purposes, including:
- home improvements
- debt consolidation
- school fees
- wedding
- second property
The benefits of remortgaging
BORROW MORE – You have the option to borrow more
LOAN TO VALUE – You could access cheaper rates if your property is worth more
CHOICE – Hundreds of lenders to choose from
OPTIONS – Change the mortgage term or repayment method
FLEXIBILITY – Swap to a more flexible type of loan
CHANGE BORROWERS – Use a transfer of equity to add or remove borrowers
MORTGAGE TYPE – Change a residential mortgage into buy to let (or holiday let) or vice-versa
Things to consider
Here are a few things to consider before applying for a remortgage:
Full application
You will need to make a full mortgage application to the new lender, disclosing your employment details, income and expenditure. This means that proof of your income and copies of your bank statements will normally be needed.
Credit checks
The new lender will carry out a search of your credit report and credit scoring, as part of their underwriting process. This is one of the advantages of a product transfer (no credit check).
Property valuation
The lender will ask for a valuation for mortgage purposes and there may be a charge for this. It is unlikely that the valuer will need to view the inside of your home, and most remortgage valuations are computerised.
Speed
Because there is no property chain, remortgages can be arranged and approved quite quickly. A standard re-mortgage should take around 4-8 weeks. However, this is considerably longer than a product transfer, which often can be done in 3-5 days.
Deposit
Do you need a deposit to remortgage? No, not normally, your equity is used as your deposit.
But, if you do have some spare cash there may be an advantage to reducing your mortgage slightly to get a lower (better) loan to value LTV.
This then gives you a choice of cheaper deals, and possibly some new lenders.
CONTACT A REMORTGAGE EXPERT
If you wish to investigate your re-mortgage options we can put you in touch with a fully qualified whole of market mortgage broker.
Your fixed rate is ending, what happens if you do nothing?
For a lot of people, the prompt to look at your mortgage or consider a product transfer is when your lender tells you that the fixed rate you signed up for a few years ago is going to stop soon.
Inevitably this means that your repayments will soon be going up.
And while you really should go online and research your different mortgage options. You don’t.
And you forget!
Sadly, lenders won’t choose a nice cheap interest rate for you, unless you have told them to.
So if you do nothing, deliberately or otherwise, once your fixed rate ends you will rollover onto the lenders standard variable rate. This is often the most expensive rate that they offer.
And then your payments will be recalculated using the SVR rate.
So which one is the winner?
There are quite a few similarities between the two, and both of them allow you to switch over to a new interest rate product.
But which one is the best?
Unsurprisingly, the best option is the one that is the closest fit for your situation, and this will be different for each person. Some borrowers are happy just to change the interest rate, while others take the opportunity to borrow a bit more.
The mortgage product transfer is very simple and hassle free. While the remortgage option gives you loads of choice and a range of deals.
PRODUCT TRANSFER
Quick and easy
No income checks
No credit checks
Can’t borrow more
May not be the best rate
REMORTGAGE
Get the best choice
Can borrow more
Can change borrowers
Possibly higher fees
Takes a bit longer
Just a small selection
of the 120 banks, building societies and specialist lenders that you could have access to.
Only an independent mortgage broker has the ability to search the whole of the market to get the best mortgage for their clients and their individual situation.
