Your mortgage is likely going to be your biggest financial commitment. So it’s important you always have the best one for your circumstances. Therefore, if you’re a homeowner and are dissatisfied with your current mortgage arrangements, you may want to think about finding a better deal, potentially with a new provider.

If your current mortgage rate is due to end in 6 months or less, you’ve just moved onto your lender's standard variable rate, or you want a more competitive deal, you may want to consider a product transfer or remortgaging. These options are popular among homeowners looking for greater flexibility and better interest rates. Remortgaging can also help you release equity or consolidate debt.

If you’re thinking about making changes to your mortgage but are unsure which is a better option for you - a mortgage product transfer or remortgage – keep reading this guide to find out what could work for your situation.

What Is a Mortgage Product Transfer?

A mortgage product transfer enables you to change your existing mortgage product to a different one while staying with the same mortgage lender. It's like remortgaging, only you’re staying with your existing mortgage provider can’t release any additional equity – unless you also take out a further advance.

You can do a product transfer from up to 3 months before your introductory deal (e.g. fixed rate) is due to end – but some lenders are starting to extend this period to 6 months before your introductory deal is due to end. The mortgage lender will usually offer you a list of available deals based on how much equity you have in your property. You won’t be releasing more equity so the amount you owe won’t change when you transfer. You’ll basically get a new mortgage at a different rate with the same lender for the same amount you have outstanding. For example, if you’ve paid 40% of your property's original value, they will offer you a 60% LTV (loan-to-value) mortgage.

Product transfers can be useful if you want to switch to a lower and/or new type of rate – e.g. a tracker, fixed-rate or discounted rate mortgage.

If you’re looking to review your mortgage and raise funds at the same, then you may want to consider remortgaging or reviewing new mortgage options with your current lender. One of our expert advisers can show you your options and help you through the process.

What Are the Benefits of a Mortgage Product Transfer?

There are many benefits to choosing a product transfer, especially when compared to remortgaging.

For example, mortgage product transfers:

  • Are usually quicker than moving to a new mortgage lender
  • Involve less paperwork than with remortgaging
  • Have fewer or sometimes no fees
  • Don’t usually require that you prove your income
  • No legal work involved
  • Can give you access to more flexible options
  • Don’t typically require valuations

Some mortgage lenders will even offer favoured rates to long term customers wishing to transfer to a new mortgage product with them.

Things to Consider About Product Transfers

Mortgage product transfers aren't for everyone.

Some of the things you need to consider before embarking on a product transfer include:

  • They limit your chances of finding a competitive deal
  • If you’ve made any improvements to the property, you may miss out on any increase in value as lenders use index linked valuations with a product transfer
  • They’ll be a wider range of options if you look across the market, rather than with just with your current lender
  • You can’t raise extra capital and can only swap your current mortgage balance onto a new product
  • You cannot add a partner to a product transfer

What Is a Remortgage?

Remortgaging is when you switch to a new mortgage product with a new lender, paying off your existing mortgage in the process. Unlike with a mortgage product transfer, you can raise extra capital with a remortgage. 

When you remortgage your home, you can borrow the same amount as your current mortgage or borrow more. You may wish to borrow more to release some of the cash you've built up in your home to pay for home improvements. Remortgaging can often be the most cost-effective way to borrow the extra money you need. 

If you want to borrow a particularly large amount, you may be required to provide evidence that you’ll use the money for your described purpose.

What Are the Benefits of Remortgaging?

Remortgaging is a significant financial investment. It's therefore important that you spend time deciding if it's the right option for you before you go ahead and remortgage your property.

Some of the benefits of remortgaging include:

  • It gives you the ability to borrow more money
  • There’s a greater chance you’ll find a more flexible mortgage or better rate and reduce your monthly payment
  • You could access lower interest rates if the value of your property has increased 
  • You’re not restricted to just your existing lender's mortgage products
  • You have the option of extending or reducing the term of the loan or changing the loan repayment type
  • You can use some of the capital in your property to fund a renovation project at a cheaper interest rate than getting a personal loan from the bank

Things to Consider About Remortgaging

There are some important points to consider before remortgaging your home:

  • You’ll need to go through a full application process, including disclosing your income, expenditure and any outstanding debts
  • The property you’re borrowing against will require a valuation which your lender may charge you for – but this will most likely be a desktop valuation
  • You'll need to appoint a solicitor or conveyancer 
  • Some lenders charge a fee for certain mortgage products
  • If you extend your term when you remortgage, you’ll be stretching your debts over a longer period, so it will take you more time and money to pay it off

Mortgage Product Transfer or Remortgaging?

There are many parallels between a mortgage product transfer and remortgaging. However, you need to weigh up the differences before considering which option is right for you.

A mortgage product transfer is quicker and involves less paperwork, so potentially a good choice if you want to keep things simple. However, if your current lender cannot offer you the mortgage product you want, remortgaging with a new lender can ensure you get the right mortgage product for your needs.

It’s important to remember that remortgaging your property can include similar fees to that of a standard new mortgage, including solicitors' fees, property valuation and conveyancer fees. These further costs may make remortgaging an expensive option.

Before deciding whether a product transfer or remortgage is right for you, consider these 4 questions:

Do You Want to Raise Funds on Your Home?

If you want to use the equity in your property to raise cash for things like home improvements or consolidating debt then a remortgage is definitely the better options out of the 2. This is because you can’t raise additional funds with a product transfer. If you want to stay with the same lender and release equity, you may want to consider asking your lender about a further advance. A further advance will be on a separate (possibly higher) rate than your existing mortgage. For information on further advances, ask one of our experts on 0330 433 2927.

Do You Want to Prioritise Speed and Ease?

A product transfer is quicker and easier than remortgaging because you don’t need to go through lender’s affordability checks, conveyancing or have a property valuation.

Has Your Property Increased in Value?

Have you done extensive work on your property? If yes, then remortgaging may be the better option. This is because a new lender will arrange a valuation on your property which will acknowledge any value increases from the home improvements you carried out. An increase in value means that you could secure a mortgage with a new lender at a lower LTV, which in turn means you could access lower rates and better deals.

Are You Worried About Rates Increasing Before Your Introductory Deal Period Ends?

If you’re approaching the last year of your introductory deal period and it’s too early to do a product transfer, but you’re worried that rates will continue to rise in this time, a better option could be remortgaging and simply paying the ERCs (early repayment charges). This way, you may be able to secure a lower rate – before they rise – which makes up for any ERCs.

You don’t want to pay ERCs unnecessarily so it’s critical you find outwhether this is suitable for you and a cost-efficient option. Ultimately it will depend on your circumstances so we recommend you get expert advice before committing to a remortgage and paying ERCs.

We Can Help You Find the Right Mortgage

It can be tricky to know exactly which kind of mortgage you need. If you'd like help finding the best option for you, contact us. At John Charcol, our team of experienced advisers can recommend a range of mortgage options to suit you whatever your circumstances. Request a call back or call us on 0330 433 2927 to get in touch.

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