In this brief blog, we will cover mortgage product transfers, how to get a mortgage product transfer and what your alternatives are.
What are mortgage product transfers?
A mortgage product transfer is when you switch your mortgage products but stay with the same mortgage lender. A mortgage product transfer may be a better alternative to remortgaging with a new mortgage lender especially when considering those on fixed-rate mortgages which have higher early repayment charges.
Most mortgage product transfers will be subsidized by the mortgage lenders with discounts, perks and mortgage product transfer offers to encourage current borrowers to carry out a mortgage product transfer rather than remortgage with a new mortgage lender.
Mortgage product transfers explained
If you are on a fixed-rate mortgage with your current mortgage lender and all of a sudden the rates on the standard variable mortgage of the mortgage lender falls below the mortgage rate you are paying on your fixed-rate mortgage.
In this case, you can ask your mortgage lender for a product transfer to its standard variable rate mortgage product which will allow you to benefit from any savings.
You should be aware of the early repayment charges most fixed-rate mortgages have although most mortgage lenders will forfeit this if you do a mortgage product transfer.
What’s the difference between a mortgage product transfer and a remortgage?
A mortgage product transfer as we have mentioned prior is when you switch from one mortgage product to another with the same mortgage lender. If you borrow more from the same mortgage lender this is known as a further advance and if you change lenders then this is known as a remortgage.
Anything other than a mortgage product transfer carried out by your mortgage lender may be more extensive and costly and you should consider if it is a better option than remortgaging with a different mortgage lender. Things such as increasing your mortgage term or getting a further advance.
mortgage product transfer vs remortgaging
There are a lot of benefits of using a mortgage product transfer over remortgaging. They include:
Mortgage product transfers will likely be cheaper
Mortgage product transfers will also be quicker
Mortgage product transfers will usually forgo any fees and costs associated with switching the mortgage such as legal fees.
Mortgage product transfers can be less complex and much more straightforward to deal with
On the other hand, the issue with mortgage product transfers is that they may limit your mortgage options to one mortgage lenders and therefore prevent you from getting more suitable mortgage products.
You should consider speaking to a fee-free mortgage broker to consider what your mortgage options are? Fee-free mortgage brokers will not cost you and you can still go ahead with your mortgage product transfer if it is the best option available to you.
How to get a mortgage product transfer?
To get a mortgage product transfer you should simply contact your current lender and let them know what you want. They will provide you with advice on the current products they have and let you know if you are eligible for any of their current mortgage products.
Getting a mortgage product transfer may be beneficial but you will never know for sure except you seek independent financial advice from a mortgage broker who may be able to advise you on your mortgage options and if the mortgage product transfer is the best option you have.
Can you get a mortgage product transfer with bad credit?
You may be able to get a mortgage product transfer with bad credit but this depends if you had the bad credit when you got the mortgage initially or since you got the mortgage.
In either case, you may still be able to get a mortgage product transfer with bad credit although the latter may prove harder.
Mortgage lenders will consider bad credit on a case by case basis and determine if they want to lend to a borrower based on their bad credit.
Bad credit may include:
Missed credit repayments
Credit account defaults
A debt management plan
A home reposession
If you are unable to get a mortgage product transfer because of bad credit then don’t worry too much as you may still be able to get a remortgage with a different mortgage lender.
You may want to speak with a bad credit mortgage broker who may be able to search the market and see if there are mortgage lenders willing to lend to you with your bad credit.
Can you get a mortgage product transfer if you are self-employed?
Getting a mortgage product transfer as a self-employed borrower will depend on if you were self-employed when you got the mortgage or not.
If you were self-employed when you got the mortgage then it should be relatively simple and straightforward to get a mortgage product transfer as the mortgage lender has already assessed you as a self-employed borrower and given you a mortgage on that basis.
If you weren’t self-employed when you got the mortgage and have recently become self-employed then you may struggle to get a mortgage product transfer as the mortgage lender may find it hard to prove the reliability of your income and estimate what your average earnings could be over a year.
Getting a mortgage as a self-employed borrower is usually hard as mortgage lenders find it hard to state what they feel is the borrowers average monthly income, they also find it hard to analyse the reliability of the income.
Most mortgage lenders will insist the borrower has at least 3 years worth of accounts and there are some mortgage lenders that will accept less than 3 years but a minimum of 12 months worth of accounts.
If you are struggling to get a mortgage product transfer then you may be able to remortgage with a different mortgage lender.
You should speak to a self-employed mortgage broker who may be able to assess the financial situation and let you know what your mortgage options are.
How long does a mortgage product transfer take?
A mortgage product transfer can be relatively straightforward as the mortgage lender is already familiar with you and your current mortgage. A mortgage product transfer will usually take place over the phone or online and the mortgage lender will inquire with you in regards to your current income and expenses.
The mortgage lender will also carry out a credit check on you to ensure you have no bad credit issues.
As a mortgage product transfer isn’t a remortgage or a further advance then the mortgage lender will usually not seek to carry out an extensive property valuation check but rather they may simply carry out a desktop valuation.
Mortgage product transfer rates and fees
The mortgage product transfer rates will, of course, differ from one mortgage lender to another. due to the fact that mortgage product transfers are more straightforward and easier to process they tend to have lower fees.
The fees may be a significant difference and reason why so many borrowers will opt for a mortgage product transfer rather than a remortgage.
This means even if your mortgage product transfer rates are higher than a similar remortgage product from a different mortgage lender the fees involved with a remortgage may be so substantial that a mortgage product transfer is a better financial alternative.
What can affect your mortgage product transfer?
If you are over 65 then you may find that many mortgage lenders who may be willing to offer you a product transfer will want the mortgage term to end by the time you are 75. This could mean that you’re not eligible to increase your mortgage term.
Your income and expenses will also be of importance to the mortgage lender. They will want to see that you still have enough disposable income to cover your monthly mortgage repayments on your mortgage product transfer.
Will you need a mortgage deposit for a mortgage product transfer?
No, you shouldn’t need a mortgage deposit for a mortgage product transfer as the mortgage deposit you originally paid should be enough to get you over the line.
In some cases where your circumstances have changed significantly e.g you are now self-employed or now have bad credit then you may need to put down a further mortgage deposit to reduce the mortgage lenders loan to value and get your mortgage product transfer,
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.