Remortgage vs Product Transfer

You’re coming to the end of your fixed rate, your mortgage lender has offered you a new deal, it looks pretty good, you’ll be paying about the same as you are at the minute and it saves you going through the remortgage process. What are you thinking?

If the answer to the above question is “I’ll just go ahead and take the deal”, I’d implore you to read on. Your mortgage is likely the largest debt you have and your house is likely the largest asset you have. Your house is also your home and, for many of you, it will be the home of your family and children too. Making quick decisions about something as significant as this is never a good idea.

Before we begin, let’s provide a quick explanation of the difference between a remortgage and product transfer. A remortgage is when you change your mortgage product and move your mortgage from one bank to another. A product transfer, sometimes called a rate switch, is where you change your mortgage product but stay with the same bank.

This blog is by no means an argument for or against either of the subject options. This is purely an argument for ensuring you find out what’s best before committing yourself. As a broker this is where we come in. Just as we source the best mortgage available when you purchase a property, we source the best mortgage available when you remortgage your home.

In terms of checking what is like-for-like cheapest out of a remortgage or product transfer, this is quick and simple to do. It will be dependent on the interest rates offered, any fees involved in leaving your existing mortgage lender and any fees involved in setting up with a new mortgage lender. Don’t get caught in the trap of “only an extra £50 a month” and you’re avoiding the “hassle” of remortgaging. Add that £50 up over 5 years and you’ve just thrown away £3,000. Now think of everything you could’ve done with that £3000…

A remortgage is about so much more than just switching you to the best interest rate available at the time though. It’s an opportunity to increase or decrease the amount you have left on your mortgage. Increasing your mortgage releases equity in your home, providing you with additional cash. There are many reasons people do this. Providing funds for upgrades to the home, a child’s first house deposit and consolidating debts are just a few common examples. On the flip side, if you’ve got surplus cash, decreasing your mortgage balance can help get your mortgage paid off faster or reduce your monthly payments. It’s also an option to increase or decrease your mortgage term – the number of years left on your mortgage. Increasing your term can ease cash flow if you’re struggling month to month. Decreasing your term can help get your mortgage paid off faster if you can afford to pay more each month.

A product transfer is suitable if you’re not wanting to make any changes to your existing mortgage and your current lender happens to offer the best deal on the whole mortgage market. As you can imagine, this is not that common and hence taking that deal your existing lender offered is rarely the best option!

When you bought your home, you likely adjusted your mortgage to suit your financial circumstances at the time. When you come to remortgage, it can be 5 years further down the line and it’s likely your circumstances will have changed. Why would you not adjust your remortgage to suit your current situation just as you did initially? We’re here to help with free, professional advice on all matters mortgage and life insurance.