Should You Stay With Your Current Lender and do a Product Transfer or Switch?

So What Is A Product Transfer?

A product transfer, often referred to as a product switch, occurs when you change your mortgage deal to a new one offered by your current lender. This means you’re switching products but not lenders, keeping your mortgage with the same financial institution.

Product transfers are typically quicker and simpler than remortgaging with a new lender, as they usually don’t require a new valuation or credit check. However, it’s crucial to assess whether staying with your current lender is the most beneficial choice for you.

Advantages Of Remortgaging With The Same Lender

1. Simplicity and Convenience Remortgaging with your current lender is straightforward—they already have your details, potentially eliminating the need for new valuations or extensive credit checks.

2. No Credit Checks Often, a product transfer does not require a new credit check. Your lender already understands your financial history and can offer products that reflect your existing relationship.

3. Lower Costs Generally, product transfers involve fewer fees. You’re unlikely to face legal fees or new valuation costs, which are common when switching lenders.

4. Maintained Relationships If you have a positive relationship with your lender, they might offer more attractive rates or products as an existing customer, which can be especially advantageous.

5. Relaxed Affordability Checks Your lender might not conduct a full affordability check for a product transfer. Since they have previously assessed your financial situation, the process can be less stringent than acquiring a new mortgage.

Disadvantages Of Remortgaging With The Same Lender

1. Limited Choices Sticking with the same lender restricts you to their products only. There might be more competitive rates or more appropriate products available elsewhere.

2. Potential for Missed Savings Even with loyalty discounts, better savings often lie with alternate lenders offering lower rates or more favorable terms.

3. Risk of Complacency Automatically remortgaging with your current lender might lead you to overlook a critical review of your financial and mortgage needs.

4. Changes in Circumstances As your financial situation evolves, the deal that was once suitable might no longer serve your best interest. Regularly reviewing your mortgage deal, whether with the same lender or a new one, can ensure you always have the best terms suited to your current circumstances.

Fees Associated With Mortgage Switching

Product Transfer Fees:

• • Early Repayment Charges (ERCs): If within the initial term, switching products might incur an ERC.

• • Product Fees: Some lenders charge for the switch, though it’s not always applicable.

Remortgage Fees:

• • Early Repayment Charges: Similar to product transfers, but applicable if you settle your current mortgage early.

• • Valuation Fee: A new lender might require a property valuation.

• • Legal Fees: Conveyancing costs can be significant when changing lenders.

• • Arrangement Fee: Many lenders charge for setting up a new mortgage.

• Broker Fees: Using a broker? They typically require payment for their services.

Remortgaging can be a great way to lower your monthly payments, tap into your home’s equity, or find a better mortgage rate. However, the process can seem daunting if you’re not familiar with it. Here’s a simple guide to help you understand what to do when you decide to remortgage your home.

Step 1: Assess Your Needs

Before starting the remortgaging process, consider why you want to remortgage. Are you looking to reduce your monthly payments, adjust the term of your mortgage, consolidate debts, or maybe fund a large expense like home renovations? Knowing your goals will help determine the best mortgage product for your needs.

Step 2: Check Your Financial Status

Review your current financial situation. This includes understanding your credit score, determining your home’s equity, and evaluating your current mortgage terms. This step is crucial as it affects your ability to qualify for the best remortgage deals.

Step 3: Shop Around For Offers

Don’t limit yourself to your current lender unless you are specifically looking for a product transfer. Compare offers from multiple lenders to see who provides the best rates and terms that fit your needs. Online comparison tools can be a great help in this process.

Step 4: Calculate Costs

Understand all associated costs with remortgaging which include exit fees, application fees, valuation fees, and legal fees. Some lenders offer deals with no upfront fees or offer to cover some costs, so keep an eye out for these opportunities.

Step 5: Apply

Once you’ve chosen a lender and a mortgage product, it’s time to apply. Ensure all your documentation is up to date, including proof of income, identification, and current mortgage details. The application process has been simplified by many lenders, and can often be done online.

Step 6: Legal And Valuation Checks

Your new lender will usually require a valuation of your property. Additionally, legal paperwork will need to be completed to transfer the mortgage from one lender to another. Some remortgage deals include free legal work and valuations as part of the offer.

Step 7: Approval And Completion

Once your application is approved, your new mortgage will pay off your existing mortgage. Any extra funds from equity being released will be transferred to you. The process typically takes 4-8 weeks from application to completion.

Step 8: Review Regularly

Remortgaging isn’t a one-time task. Regularly review your mortgage every few years as rates and your financial situation may change. Always keep an eye on the end dates of any fixed terms or introductory rates so you can reassess in good time.

Need Professional Advice?

If you’re feeling overwhelmed or unsure about finding the best remortgage deal, professional advice can be invaluable. TouchPoint Mortgages specialises in guiding homeowners through the remortgaging process, ensuring you get the best possible outcome tailored to your circumstances.

For expert assistance, visit our website: TouchPoint Mortgages Remortgages.

Does A Solicitor Need To Be Involved When Remortgaging?

When you decide to remortgage, whether to get a better rate, to reduce your monthly payments, or to release equity, the process typically involves several legal aspects. These aspects often necessitate the involvement of a solicitor or a conveyancer. However, whether you need to hire one independently can depend on the specifics of the remortgage offer and the lender’s requirements.

The Role of Solicitors in Remortgaging

A solicitor’s main roles in the remortgaging process include:

1. Legal Checks: Solicitors conduct all the necessary legal checks on the property. This includes ensuring the property title is clear and resolving any legal issues that might complicate the transfer of the mortgage.

2. Document Handling: They handle the transfer documents needed to shift the mortgage from one lender to another or to change the terms with your current lender.

3. Funds Transfer: Solicitors manage the funds transfer, paying off your existing mortgage and transferring any remaining funds to you.

4. Registration: They help in registering the new mortgage with the Land Registry.

These steps are crucial for legally and securely completing the remortgage process, protecting you from future disputes and legal issues.

Free Legal Packages

Many lenders offer “free legals” as part of their remortgage products. Here’s what you need to know about free legal services:

What Does ‘Free Legals’ Mean?

• • Covered Costs: Most commonly, free legals cover the solicitor’s fees for standard work required to remortgage. This might include dealing with the existing and new lender, conducting local searches if necessary, and registering the new mortgage.

• • Solicitor Appointments: Typically, the lender will appoint a solicitor from their panel to handle your case. It’s important to note that if you choose to use a solicitor who is not on the lender’s panel, you may not benefit from the free legals package.

• • Limitations: Free legal services generally cover only basic procedures. If your remortgage involves more complex legal issues—for instance, removing a person from the mortgage or dealing with a leasehold property—additional fees may apply.

Advantages of Free Legals

• • Cost Efficiency: Obviously, the primary benefit is the cost savings, as you won’t need to pay the solicitor’s fees for standard services.

• • Convenience: Using the lender’s solicitor can streamline the process, as they are familiar with the lender’s requirements and processes.

Disadvantages of Free Legals

• • Limited Choice: You have less choice in who represents you, which can be a concern if the case becomes complicated.

• • Potential for Delays: Panel solicitors handling high volumes of cases from various clients might not be as responsive as a privately hired solicitor.

Should You Use Free Legals?

Deciding whether to use the free legals option should be based on the complexity of your remortgage and your personal preferences:

• • Simple Remortgage: For straightforward cases, free legals are usually adequate and cost-effective.

• • Complex Issues: If there are potential complications (e.g., divorce implications, leasehold issues), consider hiring an independent solicitor who specializes in property law.

Ultimately, while a solicitor does need to be involved in the remortgaging process, the decision to use free legal services provided by the lender or to hire an independent solicitor depends on your specific situation. Evaluate the terms of the free legals to ensure they meet your needs without additional unexpected costs.

Will A Valuation Be Required When Remortgaging?

When remortgaging your property, whether a valuation is required can depend on several factors, including the lender’s policy, the amount you wish to borrow, and the type of remortgage deal you are considering. Understanding when and why a valuation might be needed can help you prepare for the remortgaging process more effectively.

What is a Valuation?

A valuation is a formal assessment conducted by a qualified surveyor to determine the current market value of your property. This assessment helps lenders decide how much they are willing to lend you as it reassures them of the property’s security against the loan.

When is a Valuation Required?

1. Lender Requirements:

• • Risk Assessment: Lenders commonly require a valuation for new customers to assess the risk level of the loan. If the loan amount is close to the property value (a high loan-to-value ratio), the risk is higher, and a valuation is almost always necessary.

• • Equity Release: If you are looking to release equity from your home, a current valuation will likely be required to ensure the loan does not exceed the property’s worth.

2. High Loan-to-Value (LTV) Ratio:

• • If the amount you wish to borrow is a high percentage of your home’s value, the lender will generally need a valuation to confirm that they are not lending more than the property is worth.

3. Property Type and Condition:

• • Unusual Properties: If your home is non-standard in type (e.g., a flat above a shop, thatched cottage) or condition, a valuation helps the lender understand the property’s true market value.

• • Significant Changes: If you have made major alterations or improvements since the last valuation, a new assessment might be required to update the potential lending amount.

4. Type of Remortgage Deal:

• • Switching Lenders: New lenders will almost always require a valuation as they have no prior assessments on which to base their lending decision.

• • Product Transfers: If you are switching to a new deal but staying with the same lender, they may not require a valuation if they have a recent one on file or if minimal risk is perceived.

Are There Exceptions?

Some lenders offer remortgage deals that come with free valuations or even no valuation at all under certain conditions:

• • Automated Valuation Models (AVM): Some lenders use digital means to estimate your home’s value based on recent, comparable sales data, which can sometimes eliminate the need for a physical inspection.

• • High Equity: If you have a significant amount of equity in your home, a lender might waive the valuation requirement, deeming the loan sufficiently secure.

Costs Involved

If a valuation is required, the cost can vary significantly based on the property type and size, generally ranging from £150 to £1,500. In some cases, lenders offer to cover this cost as part of an incentive for new customers.

Preparing for a Valuation

If a valuation is needed, you can prepare your property to ensure it is valued fairly:

• • Presentation: Tidy up both inside and out to make a good impression.

• • Repairs: Fix any obvious defects that could lower its value.

• Documentation: Have documents ready for any major improvements or extensions done, as these can increase the property’s value.

If you’re considering remortgaging and need expert advice, or if you’re looking for more tailored information on the legal aspect, visiting a specialised mortgage advisor or solicitor’s website such as TouchPoint Mortgages can provide you with detailed guidance and assistance.