Product Transfer Mortgage

What is a product transfer mortgage? 

When you have a product that’s coming to an end – like a fixed rate deal – it’s where you stay with your current lender and transfer on to a new product that they offer. So instead of reverting onto the lender’s standard variable rate, you choose another fixed or tracker rate. There’s no gap – your fixed rate ends and your new rate begins. 

How do product transfer mortgages work?

With a product transfer you simply maintain your current mortgage but renegotiate terms and conditions with your lender. For example, your fixed rate is ending and you are offered a set of new products. You choose the most appropriate one and transfer on to that when your product ends. 

What are the benefits of a product transfer mortgage? 

They are fairly simple to transact. Most lenders do no underwriting – they already have your risk on their books already so it’s a case of offering a competitive product that meets your needs. 

Because there’s little underwriting – if any – you won’t need to provide documents or follow a legal process, and it can be done instantly or within just a few days. 

Your mortgage continues, so it’s a seamless transfer; whereas when you remortgage, you have to guess what your mortgage value will be at the end date. You tend to end up borrowing  more so there’s no shortfall. It’s less seamless. 

Are there any drawbacks with a product transfer? 

Yes, mainly that you are limited by how the lender values your property. If the loan to value is not correct, you might not get as good a deal as you would elsewhere. You can get a revaluation at your own cost, however, if you feel it would be beneficial.

You are also only choosing from the lender’s own products, which may not be as competitive or as wide ranging as other products in the market. So a product transfer should be part of the assessment at remortgage stage, exploring what is the most appropriate for the client.

How does a product transfer differ from a remortgage?

A remortgage is going to require you to have the new mortgage fully underwritten, your property revalued, electronically or physically, plus there’s a legal process to pay off the existing mortgage and draw down the funds for the new mortgage. So potentially there may be additional costs there.

A product transfer is a much simpler process. You’re not leaving your lender, you’re just picking a new product. A remortgage can also be declined for many reasons, whereas if you’re offered a product transfer, you’re seen as a satisfactory customer – otherwise you wouldn’t even be offered it. 

Can I switch to a different lender when doing a product transfer mortgage?

No – you are tied into the existing terms and conditions with your lender. You can’t be with Halifax and move to Santander – that’s a remortgage. You would just pick a new Halifax product. If you want to go to a different lender you have to go through the remortgage process. 

What are the eligibility criteria for a product transfer mortgage?

Most lenders are going to offer a suite of products appropriate for your Loan to Value. The overriding criteria is that you cannot be in any arrears – if you are, they will force you onto the standard variable rate and won’t offer you any new products. Your mortgage has to be up to date. 

Do I need to pay fees for a product transfer?

If you go through a broker, that will be an advised process so there may be a fee – it’s part of a review on whether this is the most appropriate approach for you. 

If you disagree with your lender’s indexation and the Loan to Value the lender is working from, you can pay to have your property valued. But be aware, there are no guarantees that your house will be valued at a higher price. We’ve had instances where clients have paid for a valuation and it’s actually come in at a lower value than the lender was using. 

The product may have a fee, which applies to many fixed rate deals. Lenders often have products with zero fee, a small fee and a higher fee, with different interest rates for each. A good mortgage broker will assess which will be more appropriate for your situation.

But you will avoid some fees that apply to a remortgage. You won’t have to pay valuation fees, unless you choose to, there’s no application fee and no legal fees as there’s no need to do any legal work.

How long does the product transfer process take?

Most high street lenders have online systems which allow us to select the product instantly or within a couple of hours. There are also specific timeframes – for example we can often arrange a product transfer three months or six months before your current deal ends.  

So speak to your mortgage broker with lots of time – the earlier you can secure a product, the better, especially if interest rates are rising. The switch doesn’t take place until the end of your current product. 

Some lenders are more manual and there’s a bit of paperwork involved – then it can take a week or so. 

Can I make any changes to my mortgage terms during a product transfer?

The only seamless change you can make is the interest rate – choosing a new fixed rate for a set amount of time, for example. Some lenders will let you change the mortgage term, to extend it over more years. But this involves underwriting, so there will be some affordability checks. 

Will my monthly mortgage payments change with a product transfer?

Typically, yes, unless you’re moving to a product with exactly the same interest rate. It’s the interest rate that dictates the mortgage payments. 

If you’re coming off one 4% deal and onto another 4% deal, your payments won’t change. 

But if you’re coming off a 1.2% deal and onto a 5% rate, because that’s now the most appropriate for you, then yes, your payments will change. 

With a product transfer you’ll get a mortgage offer, so you will know all the details of the new product long before there’s any change to your direct debit. 

What happens when my fixed rate period ends with a product transfer?

Let’s say you take a two year fixed rate: three to six months before it ends your lender will offer you a suite of new products. Your mortgage broker will compare these deals with the whole of the market to see how they compare and whether there are any better options for you, depending on your circumstances and the market. 

Can I apply for a fixed rate product transfer if I’m on a variable rate deal?

If your lender offers product transfers, which most do and you’re on a variable rate, you can apply for your transfer immediately. If it’s early in the month, you could arrange for it to change the next month. 

If it’s a tracker rate there may be an end date to the deal, at which point you can switch to a fixed rate mortgage. If you have questions about moving from a variable rate, speak to a mortgage broker about your options. 

Is it possible to add or remove someone to the mortgage during a product transfer?

This isn’t really a product transfer, it’s a transfer of equity. That requires legal work. So while a lender can agree to add or remove someone – even within a fixed rate term – they do need to underwrite that change. Typically they need to underwrite the affordability in either situation – adding or removing someone. 

This wouldn’t normally be done through a broker, you would do it direct with the bank. Usually if you add or remove the person at the end of a deal it is simpler to remortgage under the new names, rather than deal direct with the bank to get it changed. It’s a more seamless process.  

Can I borrow additional funds with a product transfer?

This will depend on your lender. Some lenders will allow you to borrow more, with a Further Advance. Some will allow brokers to do it, others want you to do it direct. Some lenders will only allow it at the time of a product transfer – but that will require full underwriting with the lender. So at that point, it’s a good idea to look at the whole market again to look at the best options for you, which may be a remortgage.