Mortgage Product Transfers
During the past month or so, I’ve helped clients with more product transfers than I have during the 12 months prior to that.
So, what’s a “product transfer” anyway?
If you think you may not be able to re-mortgage to a new lender then you may want to consider a product transfer or a rate switch.
It’s not technically a “re-mortgage” because there is no legal work involved due to no change in lender.
It’s a transfer from your current mortgage interest rate to a new rate of interest – in other words a rate switch – but at a better rate of interest than the lender’s standard variable rate.
You can consider a product transfer normally any time from 3 months or so before the end of a current mortgage deal. And at any time you are on your lender’s standard variable rate of interest.
In the same way as a re-mortgage you will usually have options available to fix your new rate of interest at a 2, 3 or 5 year rate. In addition, you will get options to either pay an arrangement fee with a lower rate of interest or a higher rate of interest with no arrangement fee.
Why might you choose to transfer your mortgage product, rather than re-mortgage?
There are many reasons why you might choose a product transfer rather than a re-mortgage and here are a few of them:
- Your circumstances have changed
If your circumstances have changed, particularly when it comes to a residential mortgage, you may find you can no longer “afford” your mortgage.
This may be due to a number of reasons – for example, one applicant has gone part time, one applicant is no longer working, one has changed their employment status (perhaps now self-employed rather than employed, perhaps you have more children, you may have additional childcare costs or maybe you have higher travel costs to work. Or you have perhaps taken out additional credit since your last application.
Whatever the reason, if a new lender was assessing a brand new mortgage application from you, they may consider the loan you currently have would be unaffordable due to an income reduction and/or increased committed expenditure. Therefore you may not be able to obtain a re-mortgage with a new lender.
- You have limited time
I often speak to people who have left it till the “last minute” to sort out their mortgage interest rate. Perhaps they had a letter from their lender a few weeks ago, but life got in the way. And now they have a couple of weeks till their current fixed rate ends.
- Underwriting rules and/or criteria have changed
Over the past couple of years, I’ve come across some instances where landlords, due to the changes in affordability calculations for buy to let mortgages, are now no longer able to get the same level of loan as they took out 3 or 4 years ago. Effectively they are “stuck” with their existing lender as they are not able to re-mortgage to a new lender without putting additional funds into the property to increase the equity.
A product transfer is not a new application to a new lender so does not have to be underwritten nor the property physically re-valued. It is generally a quick and easy way of getting a new fixed rate pretty quickly.
Please note, however, that you may NOT get an interest rate as good as if you went to a new lender for a re-mortgage.
I’m not sure about my plans – what other options might I have?
Sometimes you will get the option for a discounted rate with no early repayment charges. This may be a good option if you are coming to the end of a fixed term but you don’t have definite plans for the next 2 years. An example I came across recently was a client was intending to move in with her boyfriend although they had not fixed a date. It was likely to be within the next 2 years. So she transferred her mortgage to a variable rate of interest which was lower than the standard variable rate but which had no early repayment charges associated with it. So she could sell her property – or re-mortgage it on a buy to let basis – without incurring penalty charges at any time during the next 2 years.
If you have left your re-mortgage to the last minute, either because you forgot about it or buried your head in the sand, please don’t hesitate to get in touch and we can see what options are available to you with your current lender.
Your home may be repossessed if you do not keep up repayments on your mortgage.
The Financial Conduct Authority does not regulate Buy to Let mortgages.
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Your home may be at risk if you fail to keep up the repayments on your mortgage.
The Financial Conduct Authority does not regulate Buy to Let mortgages.
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