Product Transfer Mortgage

What is a product transfer and how does it work?

A product transfer is when someone who’s coming towards the end of their current mortgage product transfers to a new product with the existing lender.

Is it better to stay with your existing lender?

It always depends on the individual circumstances, and that’s the same for potentially looking around the market and changing lenders. A proper consultation with a whole of market mortgage advisor will let us understand a client’s current situation and their objectives.

Often, no, it isn’t the right option to do a product transfer. A couple of lenders out there give notoriously bad rates to existing clients – they essentially prey on people being lazy.

When would I need a product transfer? Can I product transfer early?

A product transfer generally required less underwriting. If, for example, I was an employed individual who went to become self-employed six months ago, I wouldn’t have a year’s worth of books behind me. That wouldn’t justify my income to a new lender.

But my current lender would be happy, as long as I’d kept up to date with my mortgage payments. They would allow a product transfer without two years books, let alone one.

How long does a product transfer take?

It’s very quick in comparison. Most are almost instant. At worst case, you’re probably looking at 48-72 hours, but you’d get a decision very promptly because it doesn’t go through the full underwriting process. It doesn’t go through the conveyancing process either, yet when you’re changing lenders it has to go via a solicitor.

If a client came to me today on 27 June and their mortgage was due to expire on 30 June, there is no chance that I would be able to get a new mortgage for them within two working days and get through the legal process.

This would mean that the client would go on to the Standard Variable Rate, which with most lenders is circa 8.5% – so their monthly repayments will go up significantly [podcast recorded in June 2024].

Instead, it would make sense to do a quick product transfer and stay with the existing lender. It takes six to eight weeks to get through the mortgage refinancing process. That would be two months on the Standard Variable Rate with considerably higher payments.

If you’re with a good lender in terms of rate, it would probably also be cheaper just to do a product transfer.

How much does a product transfer cost?

Some product transfers still come with the usual product fees. Where I’m based in the south east of the UK, my clients’ mortgages tend to be bigger than those based in the north, purely because of property prices.

Lenders will have a couple of different products for each Loan to Value bracket, one of which will come with a product fee and one which won’t. If you pay a product fee, you will get a cheaper interest rate. It often works out cheaper in the long run to pay a product fee and get the lower interest rate, especially if you’ve got a mortgage over a particular size – £200,000 is a common figure.

So where there’s a fee associated with a product transfer, that will be beneficial for the client. There wouldn’t be any costs in terms of valuation fees, because you are staying with the existing lender.

That said, if you want to dispute what the lender has valued your property at, you may have to pay for an additional valuation fee, which wouldn’t be ideal.

Some lenders have zero product fees when doing product transfers. It’s down to the mortgage advisor to do the calculations and work out what is going to be cheapest for the client, given their circumstances.

Do you need a credit check for a product transfer?

Yes, some lenders would do a credit check. But I’m also aware that if somebody had financial difficulties within the period of their existing mortgage, for example, a default or a CCJ, they’ve got a much better chance of getting the mortgage through with their existing lender on a product transfer.

Can you cancel a product transfer?

Yes, and in fact I’ve spent a large proportion of recent months doing that for clients. When interest rates reduce, we could go back to the lender and cancel the product transfer

This does have timeframes and all lenders are different. A lot of lenders will say that you cannot cancel a product transfer within 14 days of that product starting.

For example, I did a product transfer for a client a month ago, and it was due to start on 1 July, 2024. Given that today is 27 June 2024, if that lender reduced their rates today, I would not be able to cancel the existing product transfer and get the cheaper rate.

We’re now so close to the renewal date that everything will have been set with the lender in terms of the loan amount and interest rate.

How can a mortgage broker help with a product transfer?

The right thing to do from a client’s perspective is to get in contact with their mortgage advisor as soon as possible. I reach out to my clients seven months in advance of their mortgage coming up for renewal.

It takes roughly a month to get an understanding of the client’s situation – although it could just take a day or two. But I don’t want a bottleneck, so I’d rather be well prepared and take action for my clients at the earliest possible time.

For example, I had a client whose mortgage is up for renewal in October. I reached out to them in March and put a product transfer in place with them with a high street lender at the earliest possible time, which was in early April.

Since early April, interest rates have gone up and down a couple of times with their lender, Santander. They’ve actually reduced their rates this week. So I’ve cancelled the previous product transfer and got them another product at a slightly cheaper rate.

It’s just about monitoring the market. My biggest bit of advice to any client is be prepared. The later you leave it, the harder it’s going to be to get you the right deal for yourselves.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.