Remortgaging vs Product Transfer

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Leanne from CD Financial joins the Mortgage & Protection podcast to discuss the differences between a remortgage and a product transfer.

Is a product transfer an alternative to remortgaging?

Product transfers are all about lenders deciding that they want to retain their clients rather than lose them to a different lender. Historically, people stayed with a lender for years and years. But as competition increased, people realised that they could move from lender to lender quite easily – so remortgaging became a big thing. Lenders have realised that this means people moving away from them, so they now work to retain clients by allowing you to do product transfers instead.

What are the differences between remortgaging and a product transfer?

With a product transfer, you’re staying with the same lender and just changing your interest rate. For example, your two year fixed rate deal has come to an end, and now you’re looking at a five year fixed rate. Your term pretty much stays the same, the mortgage amount stays the same, you just change the rate with your current lender. But with a remortgage, you might be changing your rate, your term and the mortgage amount – so there is a little bit more flexibility. What you choose will depend on the circumstances and why you’re looking to change your mortgage deal.

Why might I need to remortgage?

A lot of people will remortgage because they want to borrow more money, for home improvements, an extension, a conservatory, whatever they want to do. Or, your circumstances might have changed, so you may want to shorten the term of your mortgage and pay a little more each month. Another option is to get a deal where you have lower monthly repayments. Sometimes lenders don’t offer a competitive product transfer that’s right for you. So it might be that you can get a better deal by remortgaging to a different lender.

When might I need a product transfer?

Product transfers are often more relevant when your circumstances have changed. Perhaps you’ve moved from employment to becoming self-employed, or maybe you have a blip on your credit history that means you can’t get a mortgage from another high street lender. A product transfer can work well in these situations.

How do I decide which option to choose?

It’s often down to the specific situation you’re in. It’s important to do some research and maybe speak to a mortgage adviser for recommendations. Sometimes a product transfer is the best thing to do – it is usually simpler than a remortgage. In some situations a product transfer is your only option.

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What’s the difference between mortgage porting and a product transfer?

When you port your mortgage, it’s usually because you’ve got a fixed rate or a rate that you’re tied into – but you want to move house. Rather than pay early repayment charges, you can ‘port’ the existing mortgage to your new property. Meanwhile, with a product transfer, you’re staying in your existing property. You’ve got no intention of moving. You are literally just changing your mortgage product to get a better rate.

Are there differences in the process for remortgaging and mortgage product transfer?

They are slightly different. A remortgage usually needs more information, because the lender is starting from scratch with you. The lender will need to see your payslips and bank statements to prove your income and your outgoings. They’ll also do a new credit check on you. With a product transfer, because it’s your existing lender there’s no credit check. They recognise that you’ve been paying your mortgage for years and assume that you can carry on doing that. You won’t usually need payslips and bank statements either.

Are there any differences in rates and fees?

There isn’t a big difference. Some lenders do offer retention products to tempt clients to stay with them, so sometimes rates are slightly better, or there might be a slight discount on fees. Generally fees do apply, however. Making the decision is a case of looking at what other products are available, comparing rates, fees and criteria and weighing up whether it’s worth remortgaging or whether to stay with your existing lender.

What are the advantages and disadvantages of remortgaging versus a product transfer?

The main benefit to remortgaging is that you have more flexibility. You can potentially borrow more, extend your term or shorten the term. A product transfer is more static – it is literally just changing the interest rate. The benefits of a product transfer are that there’s less documentation involved, so it can often go through more quickly.

Can I remortgage with the same lender?

A remortgage with the same lender is effectively a product transfer. Your existing lenders won’t actually allow you to remortgage with them. You can ask for further advances and to amend the mortgage term, but that’s an amendment to your existing mortgage rather than a full remortgage. By speaking to a mortgage adviser you can get clear recommendations into whether a remortgage is the way to go or whether a product transfer would be better. Sometimes, if your circumstances have changed but it’s a short term issue, you can look at a short term product transfer and then remortgage in future.

Can I remortgage to pay off debt?

Yes – many people remortgage to pay off debt. Again, it’s best to speak to an adviser because there are sometimes better ways to manage debt than utting unsecured debt onto a mortgage that’s secured on your property. An adviser would look at your outgoings and find ways to save money, overpay on credit cards or perhaps reduce your mortgage payment to help you pay those debts off more quickly.

Why should I talk to a mortgage broker for a product transfer?

We have a wealth of experience that means we can find the most suitable solution for every client. We’ve also got access to a wide range of lenders and products so we can get you the lowest interest rates. Whatever your circumstances are, we’ll have seen it before and can help. It could be by remortgaging, a product transfer or simply through advice to improve your current situation, with a view to revisiting your mortgage options in the future. Just get in touch for an initial chat and we’ll take things from there.