Product Transfer vs Remortgage: Which Saves You More?
When your current mortgage deal is coming to an end, you’ll usually have a choice:
stay with your existing lender and switch to another of their deals or look elsewhere for a new mortgage.
The right choice isn’t always the one with the lowest interest rate. Fees, monthly repayments, affordability checks and your personal circumstances can all affect which option offers better value.
Here’s how product transfers and remortgages compare, and what to consider before deciding whether to stay with your lender or switch.
What’s the difference between a product transfer and a remortgage?
The main difference is whether you stay with your existing lender or move to a new one.
A product transfer, sometimes called a product switch, means moving onto a new mortgage deal with your current lender. Because you’re not changing lender, the process is generally simpler and can involve fewer checks.
A remortgage means replacing your existing mortgage with a new mortgage, usually from a different lender. This gives you the opportunity to compare deals from across the market, but there are normally more steps involved.
Whichever route you choose, arranging a new deal before your existing one ends could also help you avoid moving onto your lender’s standard variable rate (SVR), which may be higher than the rate you’re currently paying.
Is it cheaper to stay with your lender or switch?
There isn’t one answer that works for everyone. The important comparison is the overall cost of each mortgage deal, rather than simply looking for the lowest interest rate.
A product transfer can cost less upfront because there’s usually no need for legal work or a new property valuation. If your existing lender is offering a competitive rate, these savings could make staying put the better-value option.
On the other hand, a remortgage to a new lender could give you access to a lower rate. If the savings on your repayments outweigh the cost of switching, moving lender could save you more overall.
Some remortgage deals also come with incentives such as free valuations or included legal services, so don’t assume that switching will always mean paying significantly more in fees.
The best comparison is therefore like-for-like look at the rate, fees and total cost over the period of the new deal.
When can a product transfer save you more money?
A product transfer could make financial sense if your existing lender is already offering you a competitive deal and there isn’t enough of a saving elsewhere to justify moving.
staying with your current lender could work well when:
| The difference between your lender's rate and the best suitable alternative is small. | |
| Switching costs would outweigh the potential savings. | |
| You want to secure a new deal without going through the full remortgage process. | |
| Your financial circumstances have changed and qualifying with a new lender could be more difficult. | |
| You don't need to make significant changes to your mortgage or borrow more. | |
A standard product transfer will also often avoid a new affordability assessment, although individual lender requirements vary.
That simplicity can be particularly useful if your income has changed since you originally took out the mortgage. However, convenience shouldn’t be the only consideration. It’s still worth comparing your lender’s offer with suitable alternatives before making a decision.
When does a remortgage to a new lender make more sense?
Remortgaging can make more sense when another lender offers a deal that leaves you better off overall after taking fees into account.
Your home’s value may also have changed since you took out your mortgage. If it has increased while you’ve paid down your mortgage balance, you may now have a lower loan-to-value (LTV). Put simply, LTV is the percentage of your home’s value that you still owe on your mortgage. A lower LTV can sometimes give you access to more competitive rates.
There are other reasons you might consider a remortgage. You may want greater flexibility around overpayments, for example, or you might want to borrow additional money and find that another lender offers a more suitable option.
Remember to check whether your existing mortgage has an early repayment charge before switching. Depending on when you remortgage, this could significantly affect whether moving lender saves you money.
Will you need an affordability check for a product transfer or remortgage?
For a straightforward product transfer, where you aren’t increasing your borrowing or making other significant changes, your existing lender may not need to carry out a new affordability assessment.
That’s because the lender already has your mortgage and you’re simply changing the deal attached to it.
The situation can change if you want to borrow more, change who is named on the mortgage or make certain changes to the mortgage term. Your lender may need to carry out additional checks in these circumstances.
If you’re remortgaging to a new lender, you should expect affordability and credit checks. The new lender will need to establish whether the mortgage is affordable based on factors such as your income, regular spending, existing debts and credit history.
Requirements vary between lenders, so it’s worth checking what applies to your particular circumstances.
Is a product switch mortgage quicker than remortgaging?
A product switch mortgage is generally quicker than moving to a new lender.
With a straightforward product transfer, your current lender already knows you and your property. There is usually less paperwork, and you will often avoid the legal work and property valuation involved in switching lender.
A remortgage has more moving parts. Your new lender needs to assess your application, carry out its required checks and arrange a valuation where necessary. Legal work will also normally be required to move the mortgage from one lender to another.
How long either process takes will depend on your lender and circumstances, so it’s better to start exploring your options before your existing deal expires rather than leaving it until the last minute.
Can you borrow more with a product transfer, or do you need to remortgage?
A standard product transfer changes the mortgage deal on your existing balance. It doesn’t, by itself, increase how much you’ve borrowed.
If you want to borrow more, you may have other options.
Your current lender might offer a further advance, which allows you to borrow additional money alongside your existing mortgage. Alternatively, you could remortgage to a new lender and apply to borrow a larger amount.
Both options are likely to involve affordability checks because you’re increasing your borrowing.
Which makes more sense will depend on the rates and fees available, how much you want to borrow and what you plan to use the money for. Borrowing against your home also increases your mortgage debt and potentially the amount of interest you’ll pay, so it’s important to understand the longer-term cost.
What should you compare before deciding whether to stay with your lender or switch?
Don’t compare mortgages based on the headline interest rate alone. A deal offering a lower rate isn’t necessarily cheaper once its fees are included.
Before choosing between a product transfer vs remortgage, consider:
• Interest rate: How does your existing lender’s offer compare with suitable deals elsewhere?
• Monthly repayments: What will you actually pay each month?
• Product fees: Is there an arrangement or product fee, and will you pay it upfront or add it to the mortgage?
• Switching costs: Will you have legal or valuation costs, or does the new lender cover them?
• Early repayment charges: Would leaving your current deal trigger a charge?
• Cost over the deal period: How much will the mortgage cost during the initial fixed or discounted period once interest and relevant fees are considered?
• Flexibility: Consider features that matter to you, such as permitted overpayments.
• Affordability: If you’re moving lender or borrowing more, will you meet the lender’s affordability requirements?
Looking at these factors together gives you a much clearer picture of whether it makes sense to stay with your lender or switch.
Should you choose a product transfer or remortgage?
Neither option is automatically better.
A product transfer can be a good choice when your current lender is offering a competitive deal and you value a quicker, simpler process with potentially fewer fees and checks. Sometimes, staying exactly where you are really can be the better deal.
A remortgage could make more sense when another lender offers a better overall deal, even after you’ve accounted for the costs of switching. It can also give you more choice if your needs have changed since you took out your current mortgage.
The key is to compare the overall cost and suitability of both options rather than assuming switching lender will save you money, or that staying loyal will.
A mortgage broker can compare your current lender’s options with mortgages available elsewhere and help you understand the costs involved, so you can make a decision based on your circumstances.
Why clients choose Heron Financial
Heron Financial is a B Corp certified, whole of market mortgage and protection broker. Product transfers, remortgages, changing interest rates and approaching the end of a fixed deal are exactly the kind of circumstances we work through daily, we can compare the options available from your existing lender with suitable deals across the wider market, and help you weigh up rates, fees and incentives to understand which option may be right for your circumstances. If your current mortgage deal is coming to an end, talk to us before you make a decision. It’s all fee-free.
This article is general information, not personal financial advice.
FAQs
Is it better to remortgage or do a product transfer?
It depends on your circumstances and the deals available. A product transfer may be better if your existing lender offers a competitive rate and switching costs would cancel out any savings. Remortgaging to a new lender may be better if you can access a more suitable deal that saves you money overall after fees and other costs are included.
Is a product transfer cheaper than remortgaging?
A product transfer can have lower upfront costs because legal work and a new property valuation are often unnecessary. However, a remortgage could still be cheaper overall if a new lender offers a sufficiently lower rate or includes incentives such as free valuations or legal services. Compare the total cost over the deal period rather than the interest rate alone.
Do you need an affordability check for a product transfer?
For a straightforward product transfer with your existing lender, you may not need a new affordability assessment or credit check. Additional checks may be required if you want to borrow more, change the mortgage term or make other significant changes. Requirements vary between lenders.
Does remortgaging to a new lender require a credit check?
Usually, yes. A new lender will generally carry out credit and affordability checks before approving a remortgage. It will typically consider your income, expenditure, existing debts and credit history when deciding whether the mortgage is affordable.
Is a product switch mortgage quicker than a remortgage?
A product switch mortgage is generally quicker because you stay with your existing lender and typically have less paperwork to complete. Remortgaging to a new lender usually involves affordability and credit checks, legal work and potentially a property valuation, so the process can take longer.
Should I stay with my lender or switch?
Compare your existing lender's product transfer offers with suitable remortgage deals elsewhere. Consider interest rates, monthly repayments, product fees, legal and valuation costs, early repayment charges, flexibility and the total cost over the deal period. Staying with your lender can sometimes offer better value, while switching can save more when the overall savings outweigh the costs.
When should I start looking at product transfers and remortgage deals?
It can be worth exploring your options several months before your current mortgage deal ends. This gives you time to compare product transfers and remortgage deals and arrange a new mortgage before potentially moving onto your lender's standard variable rate (SVR). How early you can secure a deal varies by lender.