Product Transfer vs. Remortgage

When it comes to switching to a new mortgage product, it can be challenging to determine which option is best: a product transfer or a remortgage. We look at the difference between the two, how to assess which is best for you, and how a mortgage broker can help.

What’s the difference between a product transfer and a remortgage?

The only definitive difference is that a product transfer is switching mortgages with your existing mortgage lender, whereas remortgaging is swapping to a new mortgage deal with a different lender. Essentially, both involve taking on a new mortgage deal; however, a product transfer is simply the term for remortgaging without changing lenders.

Usually, a product transfer is used when you want a new mortgage deal because your existing one is ending. When a mortgage deal ends, you fall onto your lender’s standard variable rate. Most customers choose to avoid this rate as it’s typically the most expensive rate each lender has available.

Most people looking to borrow extra to move to a more costly property, or release equity from their home for another purpose, choose to remortgage with another lender, although it is possible to extend your borrowing when you product transfer with some lenders.

When is a product transfer the best option?

A product transfer can be the best option in several scenarios:

• Your lender offers the best rates - Some lenders reward loyal customers by offering low product transfer rates, so it may be more beneficial to stay where you are than remortgage with another lender

• Remortgage fees - Sometimes remortgage fees with a new lender can negate any benefit you would get from switching, especially if they are only offering marginally lower interest rates than your current lender

• You’re worried you won’t pass a credit or affordability check - if you have experienced bad credit or a decline in income since you took out your initial mortgage, it can be difficult to qualify for a remortgage. However, not all lenders will run a new credit check on existing customers, especially if their account is in good order

• If you don’t plan to move or borrow more - it’s often the best to remortgage to move to a larger home or otherwise extend your borrowing, but if you’re purely looking for a new deal on your current home, it’s often cheaper and quicker to opt for a product transfer

However, as with all financial products, the most appropriate for you will depend on your individual circumstances at the time, so it’s always best to speak to an experienced mortgage broker before you decide whether to choose a product transfer over a remortgage.

Why choose to remortgage instead?

Again, which option is best for you will depend on your circumstances at the time, but some reasons a remortgage with another lender may be more appealing than staying with your current lender might be:

• They offer better rates - It’s fairly typical for mortgage lenders to offer their lowest rates to new customers, to attract them to use their services. This means that you’ll often find that other lenders can offer better deals than your existing lender

• You want to borrow more - it can be cheaper and easier to borrow more money with a remortgage, as you’ll apply to the new lender for the full amount - your remaining original mortgage, plus any additional borrowing. This will all be counted as one mortgage and charged at the same interest rate. Although you can often take a ‘further advance’ to borrow more with a product transfer, this is often treated as a separate mortgage with a different interest rate

• You have gained substantial equity - If your home has increased in value dramatically, you may have gained significant equity in your home. This gives you a stronger bargaining chip in the market, as more competitive rates are typically available to those with the highest percentage of equity, which fulfils the same role as a deposit in a first mortgage

• You want to change names on the mortgage - If you’re remortgaging to take on a property by yourself that was previously shared, perhaps after a divorce, or vice versa, adding a new person to the mortgage, this cannot be done with a product transfer. You’ll have to do a full remortgage to add or remove names to or from mortgages

How a broker can help you make the right choice

No matter your reason for remortgaging, it’s a good idea to speak to a mortgage broker before you decide whether to stay with your existing lender or try for a better deal elsewhere. Mortgage brokers, like ourselves, have access to the whole market, meaning we can quickly check the availability of all remortgages suitable for your circumstances and compare them with the product transfer offers your existing lender can provide.

The most suitable deal will depend on both your circumstances and your reason for remortgaging. Finding this can be even more difficult if you have bad credit and are looking for a subprime lender willing to accept your specific type of credit issue. If you’re looking for a bad credit remortgage, a mortgage broker usually offers the greatest likelihood of finding a suitable deal.

You can book a free, no-obligation chat with one of our remortgage specialists below:

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What to do if you’ve been declined for a product transfer

If your product transfer mortgage application is declined, don’t panic. Simply follow the 4 steps below:

1. The most important thing is to ensure you understand the reason for the declined application, as this will help you to choose your next steps

2. Once you know why you’ve been declined, it’s time to speak to a mortgage broker. We can look at the reason your existing lender couldn’t support your application, and instantly understand whether this will be the case with all lenders. Mortgage lenders each have substantially different criteria, so being turned down by one lender won’t necessarily mean that you would be by all of them. Many lenders offer bad credit remortgages, for example

3. If possible, reapply with a more suitable lender - we’ll be able to advise you which lenders would consider your application, and help ensure that your application is as appealing as possible

4. If you’re not currently able to remortgage, we can advise you on the steps you’ll need to take to be considered in the future. It may be that a few minor adjustments to your lifestyle will make all the difference. We’ll also recommend steps for improving your credit, if this is the reason you’re unable to switch mortgages

Why choose Teito for your remortgage?

It can be difficult to decide whether a product transfer with your existing lender or remortgaging with a new lender is best for you. There are thousands of deals available, and each mortgage lender has different criteria and terms.

At Teitos, we can search the entire market quickly for you, including broker-only deals, which you wouldn’t have access to if you searched for a remortgage independently. Whether you’re looking for the quickest, cheapest, or a specialist bad credit deal, we’ll help you find the most suitable refinance option available to you.

Other customers chose Teito because:

• Our knowledgeable brokers are rated 5 stars on multiple review platforms

• We can help people in all types of circumstances to find a suitable remortgage deal

• Your initial consultation is always free of charge

Get started here to book a free, no-obligation chat with one of our remortgage specialists.