Within lender product transfers are popular - but will it save you money?
Friday 4 October, 2019
Thomas Oliver’s North London mortgage broker, Thomas Wheatley reviews product transfers. Agreeing a product transfer with an existing lender is easy but is it the best mortgage decision?
Product transfers are being utilised much more than in previous years, this is for a variety of different reasons.
What is a product transfer?
A product transfer is when a client moves their current mortgage product onto a new mortgage deal with the same lender. This is usually done just prior to the current mortgage deal moving to the lenders variable rate in order to prevent the client’s monthly mortgage payment increasing.
Why are product transfers beneficial?
A product transfer can be very beneficial to a client for a number of reasons.
- This is a very quick process, so if the current mortgage rate is due to expire within the month, everything could be processed so that the mortgage moves on to the new deal once the rate expires. Whereas if you move to a new lender it takes longer to set up as you need to use solicitors and there are additional checks that are carried out when you apply for a mortgage.
- For a product transfer there is no need for a solicitor to be involved in the process and using a solicitor can be very time consuming and expensive.
- The mortgage case is not re-assessed by the lender if there has been a change in the client’s circumstances. For example, if the client’s income has reduced since they took out the original mortgage it would not cause any issue if you move onto a new mortgage deal as long as you have been maintaining the mortgage payments.
When is a product transfer not appropriate?
However, a product transfer isn’t always the most appropriate choice for a client. If mortgage lenders begin to dual price on these products and clients proceed down an execution only method, it could have a detrimental effect on the client. This is for a number of reasons which I will review below.
A mortgage broker could save you money when you transfer to a new mortgage product
A mortgage broker can offer mortgage advice on all types of mortgage products, so you find the best mortgage for your financial circumstances. It is very easy for clients to transfer to a new mortgage product with the same lender, but the client may not know the positive and negatives of all the various mortgage deals available.
‘If a client is being offered a deal from their mortgage lender which a mortgage broker cannot match, they may proceed without speaking to their mortgage broker. For instance, the client may have come to the end of a 5-year fixed rate mortgage deal and believe the best mortgage option is to take the same product again. But they may not be aware of how the early repayment charges work and if they are planning to move to a new house in a couple of years the product wouldn’t be suitable. If they discussed their plans with a mortgage advisor, the advisor would review all their financial circumstances before giving mortgage advice and advise them on the type of mortgage deal that would be right for them. Also, it may be that the mortgage lender is no longer the best lender for the client. An example of this would be if the client wanted to make overpayments on the mortgage and their current mortgage lender only allowed them to pay down up to 10%. A mortgage broker would know of other mortgage lenders that allow larger overpayment each year or could discuss an offset mortgage with the client which would allow them easy access to the money that they are using to overpay.’
Product transfers in summary…
In conclusion, although product transfers are a good option for the client, they aren’t always the best mortgage solution and if mortgage lenders start dual pricing, it could lead clients to make detrimental decisions. At Thomas Oliver our mortgage broking team always discuss our clients’ current position and their financial goals before offering mortgage advice. It may be after providing mortgage advice we advise the client to stay with their current mortgage lender, but if you don’t have the conversation you could put yourself into a position which may negatively impact you at a later date. For a free initial mortgage consultation please contact one of our Thomas Oliver mortgage brokers on 01707 872000. Our mortgage brokers offer mortgage advice to clients in North London and Hertfordshire.