Product Transfer Mortgage: How to Switch Your Mortgage

Thinking of changing your mortgage deal with the same lender? You’re looking at what’s called a mortgage product transfer. This guide will run you through everything you need to know about product transfers, how they work and what to consider before you switch.

What is a Mortgage Product Transfer?

A mortgage product transfer, also known as a rate switch or product switch, is when you change your current mortgage deal to a new one with your existing lender. This is different to remortgaging where you switch mortgage provider.

Key Features of Product Transfers

Mortgage product transfers have some key characteristics that make them a popular choice for many homeowners:

• Same Lender: The main benefit of a product transfer is that it’s with your existing mortgage lender. No need to switch lenders.
• Change in Terms: This often involves changing the terms of your mortgage, such as moving from a variable rate to a fixed rate mortgage deal or changing the mortgage term or interest rate.
• Simplicity and Speed: One of the biggest advantages of a product transfer is its simplicity and speed compared to a full remortgage. Since you’re staying with your existing lender, there’s usually less paperwork, and it’s quicker.
• No Additional Borrowing: Generally, product transfers focus on changing the terms of your existing loan amount, not additional borrowing. Any additional borrowing is usually subject to further underwriting.

When is a Product Transfer Useful?

A product transfer can be useful in certain situations. Here are some examples:

• End of Initial Deal: You often opt for a product transfer at the end of an initial mortgage deal, such as the end of a fixed-rate period, to avoid going onto your lender’s standard variable rate (SVR), which could increase your mortgage repayments.
• Avoiding Fees and Checks: If you like your existing lender but want to avoid the fees, credit checks, and property valuations associated with switching mortgage lenders, a product transfer might be for you.
• Change in Circumstances: If your circumstances have changed and you don’t want to borrow more money, a product transfer can adjust your mortgage to fit your current situation.

Things to Consider Before You Switch

Before you decide on a product transfer, consider:

• Limited Options: You are limited to the products your existing mortgage lender offers. They might not offer you the best interest rate and deal on the mortgage market, but there are over 14,000 to choose from.
• Financial Position: If your financial situation has improved significantly, you might find better terms with a new lender. It’s worth talking to a mortgage broker to explore your options.
• Long-Term Financial Goals: How do the new terms fit your long-term financial goals? Even a small difference in interest rates can make a big difference over the life of the mortgage.
• Worth Switching Mortgage Providers: Evaluate the value of switching mortgage providers by comparing current mortgage rates and potential savings.

How do Product Transfer Mortgages Work?

Understanding how product transfers work is key to making the right decision. Here’s a breakdown of the process and what to consider:

The Product Transfer Process

The product transfer process is streamlined and simple, designed to make it easy to switch between your existing mortgage lender’s products. It’s a convenient way to modify your mortgage without the hassle of switching mortgage lenders.

• Speak to an expert: The first step is to contact your existing mortgage lender or contact a mortgage broker. A broker can advise and do everything for you. Choose a fee-free mortgage broker, and this valuable support will be free!
• Review Available Deals: Your mortgage broker will show you the mortgage deals available from your current lender for your mortgage switch. These deals are exclusive to existing customers and not available on the open market. Your lender will do a desktop property valuation, which could work in your favour.
• Check Eligibility: Your mortgage lender will check your eligibility for a product transfer. This assessment is simpler than applying for a mortgage with a new lender.

Documentation and Approval

The documentation and approval process for a product transfer is simpler than remortgaging. Here’s what to expect:

• Minimal Paperwork: One of the benefits of a product transfer mortgage is the less paperwork. Since you’re already a customer, the lender has most of your details.
• Credit Check: Some lenders may do a soft credit check, but this is generally less intense than a new mortgage.
• Approval: If you meet the criteria, the lender will approve the product transfer. This process is quicker than a full mortgage application.
• Secure Your New Deal: Your broker will secure your new mortgage rate, ready to switch over when your old deal runs out. A broker will ensure this is seamless so you don’t go onto the lender’s SVR or pay an early repayment charge.

Get a New Mortgage Deal: What are your Options

When considering a product transfer mortgage, you need to fully understand the mortgage options your existing lender offers, this will help you make a decision that fits your financial goals and circumstances.

Understanding these options will help you decide whether to switch mortgages or stay with your current lender.

Mortgage Types

Mortgage types are very different; understanding these differences is key to making the right decision. Here are the main types:

• Fixed-Rate Mortgages: These offer the security of a fixed interest rate for a set period. If you like predictable monthly repayments these are for you.
• Variable-Rate Mortgages: These include tracker and standard variable rate (SVR) mortgages. They can offer lower rates initially but come with the risk of rate increases.

Compare The Terms Of Your New Mortgage Deal To Your Existing Mortgage Deal

When transferring to a new mortgage product you need to compare the terms of the new deal to your existing deal, look at:

• Interest Rates: Compare the interest rates of the new deal to your existing rate and those available in the market.
• Mortgage Term: Does the new fixed or tracker deal change your mortgage term, and how does this impact your long-term plans?
• Monthly Payments: Calculate how your monthly repayments will change and whether this will fit your budget.

Charges and Fees

Charges can add to the cost of your mortgage. Here’s what to look out for:

• Early Repayment Charges (ERCs): Are there any ERCs on your existing deal and do they apply if you switch to a new product with the same lender.
• Exit Fees: While product transfers are generally cheaper than remortgaging it’s worth being aware of any exit fees or admin costs.

Stay with the Same Lender or Switch?

Before you apply for a product transfer mortgage, you need to weigh up your options. Compare the new terms with your existing mortgage and see if the transfer fits with your financial plans. While product transfers are convenient and simple, they may not always offer the best terms on the market.

Advantages of Staying with the Same Lender

• Convenience and Familiarity: Staying with your existing lender uses your existing relationship. This familiarity makes the process easier, with less paperwork and quicker completion time.
• Simpler Process: If your circumstances have worsened, a product transfer is good if you don’t need additional credit checks or property valuations.
• Lower Fees: Transferring your mortgage product with the same lender will often cost less than switching to a new provider. This can include avoiding valuation fees, application fees and legal fees.

When to Switch to a New Lender

• Better Terms with Equity: If you’ve got a lot of equity in your property you may get better terms with a new lender, lower interest rates and more flexible mortgage terms.
• Lower Payments: Switching lenders could get you a better overall deal, including lower monthly payments if the wider market is more competitive.

A mortgage broker can give you personal advice and compare deals across the market to help you decide to stay with your existing lender or switch mortgage providers.

To help you answer the question further read our guide on Remortgage Same Lender: A Comprehensive Decision-Making Guide

Will My Existing Lender Offer Me a Better Deal than a New One?

When considering a product transfer, a key question is: Will my existing lender offer me a better deal than a new one? To answer this, you must compare the mortgage options your existing lender offers against potential deals from new lenders.

Competitive Rates

Sometimes your existing lender may offer competitive or even exclusive deals to existing customers. Here’s what to look out for:

• Rate Comparison: Compare the interest rates and terms your existing lender offers with those from other lenders. Consider both the short-term and long-term impacts on your mortgage.
• Personalised Offers: Your lender may offer you deals tailored to your current circumstances, especially if significant changes have occurred since you took out your mortgage.

Additional Considerations

There are a few more factors to think about when deciding whether to stay with your existing lender:

• Credit Score Considerations: If your credit score has changed since you took out your mortgage, staying with your existing lender may be more beneficial, as they may be more lenient with existing customers.
• Market Volatility: The mortgage market can be volatile. Sometimes, the stability of a known lender and the predictability of their offers can be more reassuring than venturing into new deals in an unpredictable market.

Product Transfer Pros and Cons

Understanding the pros and cons of product transfers will help you decide if it’s right for your mortgage needs. This will let you weigh up the benefits of staying with your existing lender against the options with a new one.

Benefits of Transferring Your Mortgage

Product transfers offer:

• Less Paperwork: Less paperwork and quicker completion times.
• Existing Relationship: Continued relationship with your existing lender.
• Fee Savings: Avoidance of certain fees associated with remortgaging.

Drawbacks

However there are also:

• Limited Options: Restricted to deals offered by your existing lender.
• Missed Opportunities: Better rates are available in the wider market.

Can I Borrow More When I Transfer My Mortgage?

When considering a product transfer, you might wonder if you can increase your borrowing amount. This decision typically requires a financial assessment by your lender to determine whether additional debt is manageable based on your current financial situation and their lending criteria.

Additional Borrowing

If you’re seeking to borrow more during a product transfer, here’s what you can expect:

• Credit Check: Your lender will conduct a credit check to assess your creditworthiness, especially if you’re looking to increase your loan amount.
• Income Verification: You’ll need to provide proof of income to ensure that the new, potentially higher mortgage payments are affordable.

How Will My Affordability Be Assessed If I Borrow More?

Your lender will conduct a full financial assessment to determine if you can comfortably manage the increased monthly mortgage repayments. This step is crucial to ensure that the additional borrowing doesn’t place undue financial strain on you.

Affordability Factors

Mortgage lenders will evaluate several key metrics during the assessment:

• Debt-to-Income Ratio: This metric is crucial for understanding how your current debts compare to your income.
• Current Commitments: All your financial obligations, including existing loans and regular expenses, will be considered to ensure the new loan is sustainable.
• Interest Rate Changes: The assessment will also factor in potential interest rate fluctuations and how they might impact your ability to make repayments.

Further Underwriting Considerations

Beyond the basic checks, your lender will also consider several other factors to determine if additional borrowing is appropriate:

• Loan-to-Value Ratio (LTV): The combined total of your current mortgage and the additional amount you wish to borrow will be assessed against your property’s value. A higher LTV might limit your borrowing options or affect the interest rate offered.
• Current Financial Commitments: Lenders will consider all your existing financial obligations, such as loans and credit card payments, to ensure that the new loan is sustainable.
• Interest Rate Stress Test: To safeguard against future interest rate increases, lenders may apply a stress test to confirm that you can still afford the mortgage payments under different scenarios.
• Employment Status: Your employment history and status will be reviewed to ensure that you have a stable income, which is especially important if you are self-employed or have recently changed jobs.

Understanding these underwriting considerations, you can better prepare for the borrowing process during a product transfer and ensure that any additional borrowing aligns with your financial goals.

Mortgage Lenders Product Transfer Criteria

Mortgage lenders impose strict product transfer requirements when considering switching from their current deal with them to one with their newer one, including credit checks, affordability assessments and any circumstances under which a transfer may be denied.

You will usually be eligible for a mortgage product transfer if…

• There are no arrears on your current loan
• You are in full-time employment
• You will be under 70 when the new loan expires

If you have a standard residential mortgage, lenders typically won’t require extra checks from you. But if yours is non-standard – such as for self-employed borrowers or older borrowers or buy-to-let property owners – additional procedures such as affordability assessments could apply.

FAQs

Product Transfer Mortgage Advice from a Mortgage Broker

A mortgage broker can offer invaluable advice on whether a product transfer is right for you. They have access to the entire mortgage market and can compare interest rates and deals from various mortgage lenders, ensuring you make an informed decision.

Using a Mortgage Calculator

A mortgage repayment calculator is a useful tool to understand how your monthly repayments will change when switching to a new mortgage rate. It can help you estimate your new monthly repayments and overall loan-to-value ratio.