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 (or product transfer mortgage) allows you to switch your existing mortgage to a different product while staying with the same lender.

It’s often thought of as a remortgage with the same lender, but with a product transfer, you can’t release any additional equity - unless you also take out a further advance.

You can start a product transfer up to 3 months before your introductory deal (e.g. fixed rate) is due to end. However, some lenders are now offering the option to begin the process 6 months before your introductory deal ends. The lender will typically provide you with a list of available deals based on the equity you have in your property. Since you're not releasing more equity, the amount you owe won't change when you transfer. Essentially, you'll get a new mortgage at a different rate with the same lender for the same outstanding balance. For example, if you’ve paid off 40% of your property’s original value, they’ll offer you a 60% LTV (loan to value) product. 

Product transfer mortgages can be useful if you want to switch to a lower rate or a new type of rate - such as a tracker, fixed rate, or discounted rate mortgage. 

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

What Are the Benefits of a Product Transfer Mortgage?

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

For example, product transfer mortgages:

  • 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.

What Are the Cons of Product Transfer Mortgages?

Before opting for a mortgage product transfer, it’s important to consider the potential drawbacks: 

  • Limited access to competitive deals – staying with your current lender means you won’t have access to the full market, which may limit your chances of securing the most competitive mortgage rate 
  • Property improvements may not be reflected in the valuation – if you’ve made upgrades to your home, you may miss out on any increase in value, as lenders typically use index-linked valuations rather than reassessing the property’s market value 
  • Fewer options compared to the wider market – exploring deals across different lenders can give you a broader range of mortgage products and potentially better rates than those offered by your current provider 
  • No ability to raise extra capital – a product transfer only allows you to switch your existing mortgage balance to a new deal; you won’t be able to release equity or raise additional funds 
  • You cannot add a partner – if you want to add someone to your mortgage, a product transfer won’t allow this; you would need to consider remortgaging instead

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 decision, so it’s important to carefully consider whether it’s the right option for you before proceeding. 

Some of the key benefits of remortgaging include: 

  • Access to additional borrowing – remortgaging gives you the ability to borrow more money, which can be useful for large expenses like home improvements, debt consolidation, or major purchases 
  • Potential for better deals – there’s a greater chance you’ll find a more flexible mortgage or a better interest rate, which could help reduce your monthly payments 
  • Lower interest rates – if the value of your property has increased, you may qualify for lower interest rates, saving you money over the term of your loan 
  • Freedom to choose from a wider range of products – you’re not restricted to your existing lender’s mortgage products, giving you access to competitive deals across the market 
  • Flexible loan terms – remortgaging allows you to extend or reduce the loan term or even change the repayment type to better suit your current financial situation 
  • Cost-effective funding for renovations – you can use some of the equity in your property to fund a renovation project, often at a lower interest rate compared to personal loans from the bank 

What Are the Cons of 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 mortgage product transfer or remortgage is right for you, consider the 4 questions below.

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 mortgage product transfer is typically quicker and easier than remortgaging because you don’t need to go through the lender’s affordability checks, conveyancing process, or have a property valuation. If you’re looking for a hassle-free option with minimal paperwork, a mortgage product transfer might be the right choice.

Has Your Property Increased in Value?

Have you made extensive improvements to your property? If so, remortgaging may be the better option. This is because a new lender will arrange a property valuation that reflects any increase in value due to the work you’ve done. A higher property value could help you secure a mortgage at a lower LTV, giving you access to lower interest rates and better deals.

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

If you’re approaching the final year of your introductory deal period and it’s too early to get a product transfer mortgage, but you’re concerned about rising interest rates, remortgaging might be a smart move. In some cases, it could be worth paying the ERCs to lock in a lower rate before rates rise further. The potential savings on interest could outweigh the cost of the 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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