Product transfer vs remortgaging

When your current mortgage deal ends, you’ve got two main options: stay with your current lender through a product transfer, or switch to a new lender by remortgaging.

The difference between the two is simple – a product transfer keeps you with the same lender on a new rate or product, while remortgaging means moving your existing mortgage to a different lender. Both help you avoid reverting to your lender’s expensive standard variable rate (SVR).

But what option should you pick? We’ll break them both down here to ensure you can make an informed decision.

Remortgaging means switching your mortgage from your current lender to a completely different lender. The new lender pays off your existing mortgage and provides you with a new mortgage.

This involves a full application process with the new lender, including credit checks, income verification, and property valuation. You'll also need a solicitor or conveyancer to handle the legal transfer, as the mortgage deed needs to be removed from your current lender and registered with the new one. Once approved and the legal work is complete, your solicitor or conveyancer settles your old mortgage, and you begin making monthly payments to them.

While remortgaging involves more work and complexity, it can offer significant advantages if you're willing to shop around and go through the full process:

1. Access to the whole market: You can compare deals from various lenders, not just your current one, ensuring you get the most competitive rate available. You could also use a mortgage broker to help you find the best deal.

2. Substantial long-term savings: Even a 0.5% reduction in your interest rate can save thousands over your mortgage term. On a £200,000 mortgage, dropping from 5% to 4.5% could save roughly £2,500 over a 5-year period.

3. Lower monthly payments: Reduced payments free up cash for other priorities, whether you’re building an emergency fund, investing, or simply want more breathing room in your budget.

4. Release equity for major expenses: Access the value you’ve built up in your home to fund renovations, education costs, starting a business, or other significant purchases.

5. Better product features: Find mortgages with flexible options like overpayment facilities, payment holidays, or fee-free switching that your current lender might not offer.

6. Improved loan-to-value benefits: If you've paid down your mortgage and your property has increased in value, your improved LTV ratio often qualifies you for better rates and terms.

1. Upfront costs: Arrangement fees, valuation costs, legal fees, and potential early repayment charges can range from a few hundred to several thousand pounds, which need to be weighed against your potential savings.

Learn more: How much will it cost to remortgage?

2. Time and complexity: The process requires financial documentation, affordability assessments, and property valuations. Switching lenders involves legal work that can take several weeks to complete.

3. No guarantee of approval: If your circumstances have changed since your original mortgage, you might not qualify for the rates you're hoping for, making the effort less worthwhile.

A product transfer is when you switch to a new mortgage deal with your current lender. Your current lender will offer you their available rates and products, and you simply move from your current deal to a new one.

This process happens entirely within the same bank, building society, or lender. You’re essentially signing up for a new fixed-rate, tracker, or other mortgage product, but your mortgage stays where it is.

Product transfers offer a straightforward way to secure a new mortgage deal without the process of switching lenders. Here's why many homeowners choose this route:

1. Speed and convenience: Product transfers typically complete in just a few weeks rather than the 4 – 8 weeks required for remortgaging, with minimal disruption to your routine.

2. No legal costs: Since you’re staying with the same lender, there’s no need for solicitors or conveyancers as the mortgage deed doesn’t need to change.

3. No valuation fees: Your lender already knows your property details, so you'll typically avoid the £200-500 valuation costs that come with switching lenders.

4. Minimal paperwork: Your lender has your payment history and knows your circumstances, so there’s less documentation required compared to a full mortgage application.

5. No credit checks: Since you’re an existing customer with a proven track record, there’s usually no need for extensive credit checks or income verification.

6. Guaranteed rates: You'll know exactly what deals are available to you upfront, with no risk of being declined after going through a lengthy application process.

1. Limited choice: You're restricted to whatever deals your current lender offers, which might not be the most competitive rates available in the market.

2. Potentially higher rates: Other lenders may offer significantly better rates that could save you thousands, but you can’t access these staying put.

3. Missing better features: You'll be stuck with your current lender's product range and may miss out on more flexible terms, better overpayment options, or fee structures available elsewhere.

The right choice depends on your specific situation, what’s available in the market, and how much time and effort you’re willing to invest.

Consider a product transfer if:

Your current lender offers competitive rates compared to the market, you want a quick, hassle-free switch with minimal paperwork, or you’re happy with your current lender’s service and product features.

It's also the sensible choice if the savings from remortgaging wouldn't justify the time, costs, and complexity involved, or if your circumstances have changed and you might struggle with a full mortgage application elsewhere.

Consider remortgaging if:

You can find significantly better rates with other lenders - even 0.25% can add up to substantial savings over your mortgage term.

It's worth the effort if your current lender's product transfer options are limited or uncompetitive, you need to release equity from your home for major expenses, or you want access to better features like flexible overpayments or different fee structures.

Remortgaging also makes sense if you're unhappy with your current lender's customer service and have time to go through the application process without minding the additional steps.