Often overlooked, product transfers are the little brother to the remortgage. What makes them different? And why should you consider a product transfer for your buy to let mortgage?
What is a product transfer?
Put simply, a product transfer for your buy to let mortgage is when you switch to a new mortgage product with the same lender. Unlike your car or house insurance renewal, this won’t happen automatically. If you do nothing at the end of a fixed or tracker-rate term, you’ll roll onto the lender’s standard variable rate (SVR), which is usually higher than what you were on before, and therefore more expensive!
What are the benefits of mortgage product transfers?
A product transfer is one of the quickest ways to renew your buy to let mortgage at the end of a fixed term. Unlike a full remortgage, there’s much less paperwork to complete and very little (if any) underwriting required. Unless there’s been a significant change to your rental income or the property value, your existing mortgage lender will have all the information they need about you and the property to offer you a new buy to let mortgage rate.
The speed of product transfers is handy if, like many of us do, you’ve forgotten your fixed or tracker-rate term is coming to an end, and you’re short on time. A product transfer could be the quick win you need to avoid rolling onto the more expensive lender SVR!
Another benefit of product transfers is that there are fewer fees involved. As most lenders won’t complete another valuation, there’s no valuation charge. Some lenders don’t charge an arrangement fee, while some will charge a reduced rate, and there’s significantly less or no legal costs either. Compared to a traditional remortgage, there’s less administration required to process a product transfer, meaning there’s no need for your lender to charge as much!
What are the disadvantages of mortgage product transfers?
Just like renewing an insurance policy with your existing provider, sticking with your current buy to let mortgage lender doesn’t guarantee you the cheapest mortgage deal. If reducing your monthly mortgage repayments is important to you, I suggest that you shop around before your remortgage is due (or ask your broker to).
If you want to shop around and compare the competition, I would suggest using a broker as they’ll quickly draw up cost illustrations for the duration of the mortgage term. That way, you can easily compare your options and guarantee that the buy to let mortgage you choose is the most financially beneficial for your circumstances.
Unlike a remortgage, product transfers do not allow you to release equity from the property. So, if you’re looking to capital raise for further investment, a product transfer isn’t the option for you. Furthermore, while several buy to let mortgage lenders do offer product transfers for their customers, not all of them do. It might be that you can’t get a product transfer with your current lender, which means you will have to go through a full remortgage process at the end of your fixed or tracker-rate term.
As I mentioned earlier, if there’s been a significant change in property value or other circumstances that could impact the mortgage’s debt serviceability, or your lender has changed criteria, you may not be able to secure a product transfer. If you’re concerned about this, talk to your broker, who will be able to advise based on your circumstances.
As with anything mortgage-related, it’s ultimately your circumstances and priorities which will dictate whether it’s a suitable financial option for you. If seeking the cheapest possible deal isn’t a priority for you (which for many, it isn’t) and you don’t want to complete lots of remortgage application forms, then a product transfer is probably a good option. If you’re looking to capital raise for further investment, or want to secure the most financially beneficial buy to let mortgage option available to you, then you should undoubtedly consider alternative options in the rest of the market with your broker.
How do I get a mortgage product transfer?
The easiest way to secure a product transfer for your buy to let mortgage is to contact your broker. You’ll need to provide some basic bits of information about you and your existing mortgage (lender, account number, outstanding balance etc). From there, they’ll be able to check whether your lender offers product transfers and what your available options are.
If you have any questions about product transfers for buy to let mortgages or would like to start the process for one now, please do not hesitate to contact me, Charlie Potter, on 01732 471648 or email me email@example.com, and I’ll be more than happy to help.