Remortgage or product transfer? Which is right for me?

It’s common to feel confused by mortgage jargon. Not everyone is an expert in this highly specialised field, and most of the time you don’t need to be. You only need to know how to determine if a deal is right for you.

If your fixed term mortgage is coming to an end and you are wondering about the next steps, we can help to demystify the options available to you. If you’re considering a mortgage product transfer and want to know the next steps, read on to learn how we can help.

What is remortgaging?

Remortgaging is when you take out another mortgage on a property you already own and use this to repay your existing mortgage. You can move to a new lender, or stay with the same lender. This can allow you to switch lenders or products, or it can allow you to free up equity from your home.

Why would I need to remortgage my home?

Remortgaging is common when you come to the end of a fixed-term mortgage. Many fixed-term mortgages will last 2, 3 or 5 years. At the end of this period, lenders will switch your mortgage to a variable rate, which can mean that your monthly payments increase or decrease with interest rates. Remortgaging will help to fix your repayments again and offer some stability.

Remortgaging is also popular if you want to release some equity in your home. Rather than moving house, you could consider developing your home by releasing equity to pay for the renovations.

If you aren’t interested in releasing equity from your home and simply want to change your lending product, a product transfer might be more appropriate. This could save you a lot of time and money.

Advantages of remortgaging your property

• With more equity in your home, this will reduce the LTV, which means you will have more choice when it comes to lenders and mortgage products. This could mean you secure a better deal on your mortgage with lower interest rates.
• If you have been moved to your lender’s standard variable rate, remortgaging will help to bring some stability and predictability to your monthly payments.
• You could release funds from your home to pay for renovations. This can be a better way to fund renovations, as you will secure a lower interest rate than you could secure with a personal loan. If the renovations increase the value of the property, this will make life easier if you sell or remortgage again in future.

Things to consider before remortgaging

Remortgaging requires a complete mortgage application, so anyone named on the mortgage will need to go through the process again. If there have been significant changes to your income, such as moving to part-time work, switching to self-employment or retiring, this can impact your ability to secure a mortgage.

You will need to show evidence of income, which can be more complicated if you are self-employed or retired. You can read more about the self-employed remortgage application process here.

You will need to secure a valuation for the mortgage application, which may be an additional expense. Some lenders will charge you for this, but others include this in their lending product.

You will need to pay a solicitor or conveyancer to ensure that the remortgage documents are processed correctly. Since you already own the property, you are simply transferring ownership from yourself to yourself, but you need to make sure this process is done correctly. Mistakes on your Title Deed can cost a lot of money to fix in the future.

These additional fees may be rolled into your remortgage product, but bear in mind that you’ll be paying interest on these additional amounts. This could add up over the years, so make sure the benefits outweigh the costs.

What Is A Mortgage Product Transfer and how is this different?

A product transfer can allow you to achieve the same thing, but it is a lot less complicated to arrange. If you are happy staying with the same lender and don’t want to access any additional funding, then a product transfer might be a better option.

Like switching your electricity to a new tariff without changing suppliers, a product transfer works in a similar way. You can transfer the remainder of your mortgage to a new product, usually with a lower rate This is less complicated than remortgaging and is typically very quick to arrange.

Advantages of product transfers

• The application process is streamlined and simplified, and you won’t need to pass the financial checks as you would with a full remortgage. The application can usually be completed over the phone, and the entire process may be completed in as little as 10 days.
• You don’t have to complete the same amount of paperwork as with a full remortgage.
• You don’t have to have your property valued when applying for a product transfer. This means you don’t need a solicitor or conveyancer, which reduces the costs.

Things to consider before a product transfer

This option doesn’t allow you to release any equity from your home. You are simply moving your existing mortgage balance from one product to another.

You have to stay with your current lender, as mortgage transfers between lenders are not possible. This could mean you aren’t getting the best deal available, but if speed and ease of transfer are more important to you, this might be worthwhile.

You won’t be able to make any changes to the applicants, so if you’re hoping to add or remove a partner from your mortgage, this isn’t the right choice for you. Adding or removing someone from your mortgage requires you to remortgage and go through the appropriate legal steps.

Remember that any remortgage or product transfer may incur an early repayment fee, so consider this before moving forward as this can remove any potential savings.

If you’re thinking about remortgaging or securing a product transfer, we can help connect you with the right lenders.