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In this edition of the Mortgage and Protection podcast, Steve tells us all we need to know about product transfer mortgages.
A mortgage product transfer is where you stay with your current lender, but change products. For example, say you are coming to the end of your existing rate. Instead of remortgaging, where you start a new mortgage with a new lender, with a product transfer you take a new deal with your current lender.
It will completely depend on your situation and what’s on offer from the lenders. Here at Momentum, we will look at lenders from across the market to compare the options.
Sometimes product transfer is the best course of action. It can also be a lot quicker, as the application is easier. You can often find this approach gives you the best rate, especially among the high street lenders. These providers are usually quite competitive and work hard to keep their existing clients.
With a product transfer, it usually takes a few days to produce the mortgage offer, then the new deal will typically take effect from the next month. A big advantage with product transfers is there’s no legal work, unlike with a remortgage.
For a remortgage there will always be a full credit and affordability check, applying the normal criteria as if it was a completely fresh new mortgage. With product transfers, there is a credit search, but the affordability rules are less strict – lenders just require a declaration.
As long as nothing has changed in your financial circumstances or income since you applied for the mortgage, that’s generally enough.
A big advantage of a transfer is that some lenders will let you transfer straight away and waive any early repayment charges. Say if you’re within five months of your rate ending, you can start the new rate early – but clearly, you won’t be keen to do that if the rate has increased!
With product transfers, there are no solicitors’ fees. Plus, the broker fees we charge are actually less for transfers than remortgages, although the service you get is similar. Arrangement fees are sometimes applicable on a product transfer, typically around £1,000 which you can add to the loan.
With a remortgage the fees are similar, but you also need to pay legal costs. If you use a solicitor on the lender’s panel, they will often include this for free. Other lenders will give you cashback of £300 or £500 – but this doesn’t always cover the cost of remortgaging. Plus broker fees are a little higher because there’s more involvement in the application stage and in chasing solicitors etc.
With product transfer, there is no transfer of funds so it’s immediate. With a remortgage, offers are agreed within around 2-3 weeks. Then you’re typically looking at a further six weeks before you can draw down the funds from the new lender.
There are some great products that won’t have an arrangement fee, and there are some that will. Generally, the products with an arrangement fee offer lower rates.
This is why brokers offer such a useful service – we do all the calculations for you. We’ll look at whether a £1,000 fee is worth it in the long run. By looking at the total cost for the mortgage we can compare like for like, so you can make an informed decision.
Momentum Mortgages is a trading name of Embrace Financial Services which is an Appointed Representative of PRIMIS Mortgage Network, a trading name of First Complete Limited which is authorised and regulated by the Financial Conduct Authority for Mortgages, protection insurance and general insurance products.
YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
We will charge a fee of between £99.00 and £999.00. The amount we will charge is dependent on the amount of research and administration that is required. Please refer to the Terms of Business for further information.
The Financial Conduct Authority does not regulate all Buy to Let mortgages