Homeowners who accept a product transfer from their mortgage provider could be paying £600 more a year than necessary, new data suggests.
Some lenders are excluding the best of their deals from the product transfers they offer to customers who are approaching the end of their fixed rate period.
This can be costly for homeowners, with research suggesting that the best deals are being reserved for new customers and those remortgaging completely.
What is a product transfer?
When you’re nearing the end of your mortgage deal’s fixed rate period, your mortgage lender may offer you a ‘product transfer’.
The lender will usually present you with a list of available deals based on the amount of equity you have in the property. For example, if you’ve paid of 30% of the property’s original value, your lender will offer you an 70% loan-to-value (LTV) mortgage.
What are the benefits of a product transfer?
The main benefit of a product transfer is that it will usually work out more affordable than your lender’s standard variable rate (SVR). If you don’t accept the product transfer and you don’t remortgage, you’ll almost certainly be moved onto your lender’s SVR automatically. This could see your repayments increase as a result of a greater interest rate.
Another benefit of a product transfer is that it’s usually considered faster than remortgaging. You won’t need to pass any credit checks or affordability tests. You also won’t need the help of a solicitor, nor will you need someone to value your property again.
What are the benefits of remortgaging?
Although a product transfer can seem like the most straightforward solution to avoid your lender’s SVR, it can be costly.
Remortgaging could potentially save you thousands over the course of your mortgage deal, giving you access to a wide range of mortgage products and allowing you to find a deal that’s best suited to you. Sticking with your current lender will limit the amount of choice you have.
How do I find out which option is best for me?
Using a mortgage broker can be a great way to find the best deal for you. A mortgage broker will compare countless products on the market before pointing you in the direction of the ones that meet your needs, whether you’re looking to prioritise affordability, flexibility or low interest.
Your mortgage broker won’t be able to help you do a product transfer. This would have to be completed through your existing lender directly, but it’s likely that your broker will be able to find you a more affordable deal elsewhere. If you already have your product transfer options to hand when you contact a mortgage broker, they may also be able to do some affordability checks for you.
If you opt for a product transfer, it’s important to take arrangement fees and other charges into account. When your lender sends you the list of the various options available, they’re unlikely to factor fees into each mortgage product’s affordability score. As a result, the deal with the lowest interest rate might not necessarily work out the cheapest deal overall.
To learn more about remortgaging your property and finding the best mortgage deal for you, please get in touch with the team at TaylorMade.
