Published 25 April 2017 · Last reviewed 8 April 2020 · Older article — see current rates
Advantages and Disadvantages of opting for a mortgage Product Transfer and staying with your exciting provider rather than a Remortgage.
As part of my role as a Mortgage Advisor, I look after my clients with their initial mortgage (as you would expect) but also take great pride when their mortgage comes up for renewal by using mortgage product transfer or remortgages to save them money.
As a whole of the market independent mortgage broker, I can offer mortgage advice without bias or restriction, and will not channel applications in certain directions for short term game. A mortgage product transfer makes me less money but if the deal is right for you – I will tell you even if it my financial detriment – as it’s the right thing to do!
As part of my transparency, I will run through the pros and cons of using either a product transfer or remortgage, and as such, I often pick up clients that either went directly to the Lender or used another Broker initially.
Below are generic guidelines on the advantages and disadvantages of a mortgage product transfer on residential properties. It’s important to stress these are generalisations and every Lender will have their own rules and every clients’ needs and circumstances will be different. I can individually guide on a suitable route for you to take.
key consideration points
Mortgage Product Transfer
Remortgage
Service
Quicker process with lighter paperwork Probably a similar process to your original application.
Valuation
No charge. Normally an indexed ‘desktop’ valuation is applied.
The downside is this is unable to detect significant home improvements and exact current values unless similar properties have been sold recently in the vicinity.
Assessed by a Surveyor so should reflect the ‘true’ value.
Increased equity assessment can lead to better products and the ability to borrow more.
There are readily available remortgage products that include a ‘free’ basic valuation for mortgage purposes only.
Product choice
Limited to your existing provider. Annoyingly rates for existing borrowers may not be as attractive as those open to new customers. Whole of the market.
Repayment vehicle
The Lender will normally allow you to keep the same repayment method on the condition only the rate is to change. This can be advantageous as most residential mortgages now have to be on repayment. Normally repayment unless you have good earnings and equity.
Mortgage term
The Lender could be rigid to any changes to the existing mortgage other than the rate. So if you wanted to pay the mortgage off earlier by reducing the term, or extend the term to reduce your monthly payment this option may not be open to you.
Most Lenders want your mortgage repaid before the age of 70 years. In addition, some Lenders limit the maximum term to 35 years but others will go for longer.
Legals
No legal work involved.
Legal work will be performed by the new Lender.
There are readily available remortgage products that include a ‘free’ basic legal service for mortgage purposes only.
Title changes
Not available. Most Lenders allow this provided the remaining party(s) can afford the mortgage in their own right.
Capital raising / Debt consolidation
This is normally a separate further advance application with full underwriting and documentation required. The rate choice is often restricted, the reason for the funds prohibitive, and there would need to a reasonable amount of equity left after the transaction i.e. typically 25%.
Any legal reason apart from the repayment of a tax bill and business start-ups. Depending on the lender borrowing may be available to 95% of the property value.
Niche Advice will offer suitable advice to new and existing customers on the mortgage product transfer process.