Mortgage Product Transfer vs Remortgaging

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.

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.

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

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.

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

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.