Can you save money with a product transfer or remortgage?

Christina Hoghton
Written By:
Christina Hoghton

One mortgage advice firm has published its top tips and hints to keep your monthly costs as low as possible

With the coronavirus outbreak causing a squeeze on many of our personal finances, cutting our outgoings is more important than ever.

To help borrowers, national mortgage broker business, Mortgage Advice Bureau, has published useful information on remortgaging and product transfers for those who might be unsure of their next move.

The Frequently Asked Questions about switching your mortgage are answered in plain English to explain exactly what product transfers are, how they differ to remortgages and who can benefit from them.

Your questions answered

What is a remortgage?

A remortgage is when you switch your existing mortgage to another lender.

Why might you consider remortgaging?

Whether you should remortgage or not will depend on your individual circumstances and needs. If you’re looking to reduce your overall outgoings, then a lower interest fixed rate mortgage may be a good option for you.

Brian Murphy, head of lending at Mortgage Advice Bureau, said: “The current lockdown period has meant that most people have more time on their hands, which could be used to prepare your finances. Many of us are now looking at all our outgoings and seeing where cost savings can be made, which makes sense.”

There are also many other reasons people remortgage, such as:

  • You’re on a standard variable rate (SVR) and want to move onto a fixed rate deal so you can be certain of your monthly repayments
  • Your current deal is about to end
  • You want to borrow more money (subject to equity levels)
  • You want to switch from an interest-only to a repayment mortgage
  • You want a lower payment rate
  • You’re wary of interest rates going up

What’s a product transfer?

This is where your current lender offers you a further follow-on or replacement mortgage product. Due to the current financial climate, the product transfer could mean a lower interest rate too, in some instances.

Should I do a product transfer to get a better rate?

With the Bank of England cutting interest rates to a record low of 0.1% recently and with typical fixed rate mortgages being at or close to all-time low levels, a product transfer could offer you an improved rate.

“It’s perhaps even more reason for anyone on SVR to look at alternative products even with their current lender or via a remortgage,” said Murphy. “A product transfer could be the best form of saving to be made in these uncertain times where lots of people are under financial pressure.

“Of course, we don’t know what interest rates will look like this time next year, but it’s worthwhile reviewing your options sooner rather than later.”

When shouldn’t you remortgage?

When weighing up whether to remortgage, you need to consider money, timing and your personal circumstances, as well as the following scenarios:

  • If you have a very high early repayment charge and therefore the cost of remortgaging might be outweighed by the cost of exiting from your current deal
  • If you have a very low level of equity in your current property, you may find it difficult to get an improved mortgage deal

Where can you get a remortgage from?

You can remortgage with a bank, building society or specialist mortgage lender and a mortgage adviser with access to several products and lenders will be able to advise you on what’s most suited to your current circumstances.

What costs are involved in remortgaging?

The costs involved in remortgaging will depend upon your individual circumstances. Possible costs to look out for are:

  • Early repayment charge to your existing lender
  • An exit fee to your existing lender
  • Possible mortgage fees to your new lender
  • Possible fees including valuations, conveyancing and mortgage
  • Potential mortgage adviser fee

Read Mortgage Advice Bureau’s quick guide to remortgaging and product transfers, here.