Product Transfer or Remortgage?

When your current mortgage deal comes to an end, you’ll face a choice. Do you stay with your existing lender and take one of their new mortgage deals, known as a product transfer. Or do you look elsewhere for a better offer from a new lender, and consider remortgaging?

This guide will walk you through the key differences between each option, so you can make the right choice for your circumstances.

What Is a Product Transfer Mortgage?

A product transfer is the main alternative to remortgaging, where you stay with your current lender and simply switch to a new mortgage deal. It's often seen as a simpler, faster option because the lender already has all your details. You're not applying for a new loan; you're just transferring to a different product.

Here’s what usually happens:

• Your lender contacts you when your deal is close to ending.

• You choose a new rate from the options they’re offering.

• If you’re not changing your loan amount or term, you wouldn't usually need a new affordability check or property valuation.

• A product or arrangement fee may apply, depending on which deal you're choosing, but legal fees and valuations are often skipped.

• Your balance and mortgage term stay the same.

Product transfers are also an easy, low-fuss way to avoid slipping onto your lender’s Standard Variable Rate (SVR), which is almost always more expensive.

How Do They Differ From Remortgages?

The key difference between a product transfer mortgage and a remortgage is that you stay with your existing lender. With a remortgage, you pay off your current mortgage with a new one from a different lender, whereas for product transfers you stay with your existing lender.

Remortgages may seem like a lot more effort than product transfers, but this option can often unlock a much more competitive mortgage deal saving you more money in the long run.

Here’s a quick comparison of the two options.

When Is a Product Transfer the Right Choice?

A product transfer can be a sensible route to take if:

• Your financial circumstances have changed: maybe you've only recently switched jobs or employment status (employed to self-employed), and want to stick with a lender who knows your complete financial and personal background.

• Your lender offers a competitive rate: depending on who your current lender is, they could be offering you a new mortgage deal which is close to the best that are available.

• You want to avoid hassle: no valuation, legal work, or new affordability checks.

• You're concerned you may not qualify elsewhere: product transfers can be more forgiving if your credit score has dipped or your income has changed.

• You’re not planning big changes: if you don’t want to borrow more or extend your term, it’s the simplest route.
  

When Is Remortgaging the Right Choice?

Remortgaging can be the smarter move if:

• Better rates are available elsewhere: a lower interest rate can mean bigger long-term savings.

• You want to borrow more: this could be for home renovations, debt consolidation, or other expenses such as a new car or holiday.

• Your existing lender’s offers aren’t competitive: some lenders don’t match the best rates on the market.

• Your finances are healthy: if you’ll pass affordability checks easily, you'll have a much better chance of accessing the most competitive deals.

• Your loan-to-value (LTV) has improved: paying off more of your mortgage or rising house prices could put you in a lower LTV bracket, which usually means lower rates.

• You want extra features: higher overpayment flexibility, offset facilities, or a different repayment structure.

What Are the Pros and Cons of Product Transfer Mortgages?

Choosing to stay with your current lender can be a straightforward process, but it’s important to understand the full picture before committing.

Why They’re a Great Idea:

• Speed and simplicity. A product transfer can be arranged in a matter of days. You'll have less paperwork to deal with, and you won’t need to go through a full affordability assessment, which is great if your circumstances have changed.

• Lower upfront costs. You won't need to pay for legal or valuation fees, which will usually apply when you remortgage to a new lender. You may still be charged an arrangement fee, but this can often be added to the mortgage loan amount.

• Convenience. Staying with your existing lender feels familiar and safe. If you have an unusual property or a complex income, staying put can avoid a lot of hassle.

What to Watch Out For:

• Missing out on the best deals. A product transfer means you only have access to a very limited number of mortgage deals from your existing lender, so you're not guaranteed to get the best interest rate on the market.

• Less flexibility. You can't release equity from your home with a product transfer mortgage. If you want to borrow more, your lender may allow a further advance, but this will often be at a different interest rate.

• No new valuation. Your current lender will use an index-linked valuation to confirm the value of your property, which won't reflect any improvements you’ve made since first taking out your mortgage. This means you may miss out on getting a lower LTV, which would usually give you access to better rates.

Can You Be Declined for a Product Transfer Mortgage?

While product transfers are generally easier to get approved for, there are certain circumstances where you're application could be rejected, such as:

• You want to change your mortgage term. If you want to either shorten or extend the term of your mortgage, your lender may need to conduct a new affordability assessment. If your income has dropped or your outgoings have increased, you could be declined.

• You have had a poor payment history. Lenders will only offer a mortgage product transfer if you have kept up with all your repayments and have a good payment record.

• The new product has different eligibility criteria. The mortgage product you’re transferring to may have different eligibility criteria that you no longer meet. For example, some lenders are stricter with new deals if you’re self-employed.

• You want to borrow more money. If you want a further advance, your lender will need to carry out a full affordability assessment, which could lead to a rejection if you no longer meet their eligibility criteria.

Why Pick Picnic for Your Next Mortgage Deal?

Trying to compare the mortgage deal you've been offered by your existing lender with the rest of the mortgage market can be a challenging and time-consuming process, particularly if you're trying to do it on your own. Having an experienced mortgage broker on your side - like us! - makes things much easier and more efficient. 

Here’s how we can help:

• Finding you the best mortgage deals: Our mortgage team will already know which lenders are currently offering the most competitive rates, having access to the wider mortgage market rather than just a handful of high-street lenders. They can compare mortgage deals from over 100 lenders to find the one that’s right for your circumstances, including exclusive offers not generally available elsewhere. 

• Your mortgage, made simple from start to finish. Our online portal allows you to track your mortgage application step-by-step, sign and upload documents in seconds, and contact your mortgage team at any time. No back-and-forth emails. No printing. No guesswork. Everything you need, all in one place, so you can stay organised and in control of your mortgage journey. 

• Making mortgages possible, whatever the circumstances: Our team of advisors have a clear understanding of the eligibility criteria used by each lender and will identify the one that's best placed to help. Our sister brand, Haysto, has become the No.1 destination for customers who've been turned away elsewhere. For anyone with a complex income or adverse credit record - we’ve got your back!