Should I stay with my current lender or do a product transfer?

What is a product transfer?  

A product transfer, also known as a product switch, is a process where you switch from your current mortgage deal with your existing lender to a new one offered by the same lender. 

Essentially, you are changing your mortgage product while staying with the same lender.

Whilst a product transfer is generally a simpler and faster process than remortgaging with a new lender, it’s not always the right thing to do. 

Should I remortgage with the same lender? 

Remortgaging with the same lender can be a good idea in some situations, but it’s important to weigh the pros and cons before making a decision. Here are some factors to consider:

Pros of remortgaging with the same lender:

Simplicity

Remortgaging with the same lender can be a straightforward process since they already have your details on file and may not require a new valuation or credit check. 

No credit checks

In most cases, product transfers (also known as product switches) with the same lender do not require a credit check. This is because the lender already has your financial information on file and can assess your eligibility for their products based on your existing mortgage history with them.

Remortgaging with the same lender can be a good idea in some situations, but it’s important to weigh the pros and cons before making a decision.

Generally, fewer fees overall

In general, product transfers (also known as product switches) with the same lender are usually less expensive than a remortgage with a different lender, as there are typically fewer fees involved. 

There aren’t normally any legal steps or legal fees to pay and it is unlikely that a formal valuation will be carried out on your property.

Here are some of the fees that you may encounter for each option:

Product Transfer Fees

• Early repayment charges (ERCs): If you are still within the initial term of your mortgage, you may be charged ERCs if you switch to a new product before the end of the term.

• Product fees: Some lenders may charge a fee for switching to a new product, although this is not always the case.

Remortgage fees

• Early repayment charges (ERCs): If you are still within the initial term of your mortgage, you may be charged ERCs if you pay off your existing mortgage early.
• Valuation fee: The lender may require a new valuation of the property, which can result in a valuation fee.
• Legal fees: You may need to pay legal fees for the conveyancing process, which involves transferring the property ownership to the new lender.
• Arrangement fee: Some lenders charge an arrangement fee for setting up a new mortgage.
• Broker fees: If you use a mortgage broker, they may charge a fee for their services.

Existing Relationship

If you have a good relationship with your lender, they may be more willing to work with you to find a suitable mortgage product. There are less set up costs when switching with your existing lender, they may therefore be able to offer you better rates as an existing customer. 

Less emphasis on affordability 

 Lenders typically do not perform a full affordability assessment when you apply for a product transfer (also known as a product switch) with the same lender. 

This is because they already have your financial information on file and have previously assessed your affordability when you took out your original mortgage.

Cons of remortgaging with the same lender:

Limited Options

Staying with the same lender may limit your options since you are only considering their products. You may be able to find better deals or more suitable products by shopping around with other lenders.

Missed Savings

Even if your current lender offers you a loyalty reward, you may still be able to save more money by switching to a different lender with a better rate or terms.

Complacency

By automatically remortgaging with the same lender, you may miss out on the opportunity to review your finances and mortgage options.

Circumstances Change Over Time

Your financial situation can change significantly over time, which means that the mortgage product that was the best fit for you in the past may not be the best option for you now. 

For example, if you’ve had a pay rise or improved your credit score, you may be able to qualify for a better interest rate than you did when you first obtained your mortgage.

What to do when remortgaging:

• Review your finances and goals: Before remortgaging, it’s essential to review your financial situation and goals to determine if staying with your current lender is the best option.

• Shop around: Research other lenders to compare rates, terms, and fees to ensure you are getting the best deal possible.

• Seek professional advice: Consider seeking advice from a mortgage broker like Strive Mortgages or a financial advisor to help you make an informed decision. 

• Check for fees and charges: Review the fees and charges associated with remortgaging with your existing lender to ensure it is cost-effective.

• Avoid mistakes: Be sure to avoid common remortgaging mistakes, such as not budgeting for upfront fees or failing to consider the long-term costs.

Do I need a valuation when remortgaging?

When applying for a remortgage, the lender will want to determine the current market value of your property. 

In most cases, they will use a drive-by or online valuation, which involves a quick assessment of the property’s exterior and recent sales data in the area.

However, in some cases, such as when the property is of properties of non-standard construction or is located in an unusual area, the lender may require a full valuation. 

This involves a surveyor visiting the property to inspect its condition, size, and any unique features that may impact its value. 

The surveyor will also verify the information provided by the borrower, such as the number of bedrooms and bathrooms, the condition of the property, and any recent renovations or improvements.

When remortgaging most mortgage lenders including a remortgage with your current mortgage lender will offer a free remortgage property mortgage valuation.

Do I Need Conveyancing When Remortgaging?

While it is possible to complete the remortgage process without a conveyancer, it is generally recommended to use one when remortgaging to a new lender to ensure that the process is completed smoothly and accurately. 

When remortgaging, most mortgage lenders will cover the cost of solicitor fees for you. If you go through your own solicitor, they may offer you cash back to cover some of the costs. 

If you use your own solicitor to remortgage it will usually cost between £500 -£800.

Mortgage lenders usually offer between £250-£500 cash back to contribute towards legal costs, it’s often more cost effective to use the lenders solicitor.

What does a conveyancer do when remortgaging?  

A conveyancer is a legal professional who specialises in property law and can help you with the legal aspects of the remortgage process.

When you remortgage, you will need to transfer the legal title of your property from your existing mortgage lender to your new lender. 

This process is known as conveyancing, and it involves a number of legal steps to ensure that the transfer is valid and legally binding.

A conveyancer can help you with tasks such as:

• Reviewing the remortgage offer from the new lender to ensure that the terms are fair and reasonable
• Conducting property searches to identify any potential issues that could impact the value or use of the property, such as planning restrictions or environmental risks.
• Preparing legal documents and arranging for their execution, including the transfer of the legal title of the property to the new lender.
• Managing the exchange of funds between the new lender, your old lender, and yourself.
• Registering the new mortgage with the Land Registry.

When should I start to think about remortgaging?

The best time to consider remortgaging will depend on your own circumstances, here’s several reasons that often prompt borrowers to consider remortgaging. 

• Rate coming to an end: As your current fixed or variable rate approaches its expiration, it’s advisable to explore remortgaging options. This allows you to secure a new deal before being transferred to your lender’s standard variable rate, which may be less favourable.
• Interest rates have fallen: If there has been a significant decrease in interest rates since you obtained your mortgage, it might be advantageous to remortgage. Lower rates could potentially result in reduced monthly payments or overall interest costs.
• Change in financial needs: If you require additional funds, such as for home improvements or debt consolidation, remortgaging could allow you to release equity and access the money tied up in your property.

How long are remortgage offers valid for?

The validity period of a remortgage offer can vary depending on the lender and the specific terms of the offer. 

In general, remortgage offers are valid for a period of between three and six months, although some lenders may offer longer or shorter validity periods.

It’s important to note that the validity period of a remortgage offer refers to the period during which the offer is available to you, not the period during which you must complete the remortgage process. 

Once you accept the offer, you will typically have a period of several weeks or months to complete the remortgage process and transfer the mortgage to the new lender.

How can Strive Mortgages help? 

Strive Mortgages can provide valuable assistance when remortgaging your property. Here are some ways a broker like Strive Mortgages can help:

• Compare offers: A mortgage broker can help you compare different remortgage offers from different lenders. They can access a range of deals and help you choose the one that is most suitable for your needs.
• Provide advice: A broker can provide expert advice on the remortgage process, including how to prepare your application, what documents you need, and what to expect during the process. They can also help you understand the costs associated with remortgaging and help you calculate your savings.
• Help with the application process: A broker can help you complete your remortgage application, ensuring that all the necessary information is included and that the application is submitted correctly and on time. They can also help you understand the terms and conditions of the new mortgage.
• Negotiate with lenders: A broker can negotiate with lenders on your behalf to ensure that you get the best possible deal. They can use their knowledge and experience to secure better terms, such as lower interest rates or reduced fees.
• Provide ongoing support: A mortgage broker can provide ongoing support even after your remortgage is complete. They can help you manage your mortgage payments, provide advice on additional borrowing, and help you navigate any issues that arise.

Overall, a mortgage broker can provide valuable assistance when remortgaging your property, helping you save time, money, and hassle throughout the process.

Summary 

In conclusion, remortgaging with the same lender can be a good option in certain circumstances, but it’s important to weigh the pros and cons carefully. 

By reviewing your finances and shopping around, you can ensure that you get the best deal possible and avoid common remortgaging mistakes.

For more information on product transfer, please contact a member of the Strive team, by emailing info@strivemortgages.co.uk or call us on 01273 002697.