Rates are on the rise – do you remortgage or opt for a product transfer?

It won’t have gone unnoticed that interest rates have been rising pretty fast over the past few months. And it doesn’t look like this is likely to change any time soon. So what do you do if your current fixed rate mortgage is about to come to an end? Well, the key thing to remember is not to do nothing! If you leave it, your mortgage will simply revert to a lender’s (now much higher!) standard variable rate which means you could end up paying hundreds of pounds more a month than is necessary.

You have two options, in a change which has come about over the last five years, most lenders will now offer clients a ‘product transfer’ or ‘rate switch service’, which means you can transfer your existing mortgage to another product from their current range.

This process is reasonably pain free in the sense that it requires no underwriting, income evidence etc and in most cases your property will not need to be valued as the lenders will already hold the indexed figure on file from the original application which makes life easier. Nearly all the applications of his type are done online so the only thing you may be required to do is sign the acceptance from after checking all the details are correct.

Some lenders will even allow you to transfer products ‘early’ ie before your current fixed rate ends if a lower rate is available as a thank you for staying with them. How times have changed from being forced to go onto their higher standard variable rates!

The pros and cons of opting for a product transfer

PROS

• Fast processing, on occasions can be done in a matter of hours
• No underwriting, credit checks or property valuations
• No legal fees or conveyancing required

CONS

• By staying with your existing lender, you may not be getting the absolute lowest rate on the market
• You can’t adjust the borrowing amount or term of the mortgage

The alternative to the above is that we could look to the open market and potentially remortgage you to another lender if there is good reason to and circumstances permitted it. This would normally be done if other providers were offering considerably better rates than our existing lender or if you were looking to increase the borrowing amount for reasons such as home improvements, debt consolidation or perhaps to purchase another property. We would then compare the open market options to the Product Transfer rates and decide together on the best way forward for you.

If we were to remortgage you to an alternative lender the application would need to go through the normal underwriting process confirming both affordability and suitability of the product alongside the property itself also then needing to be valued to confirm it was suitable security.

Once the offer is produced, the legal side of the process will then need to be completed as a solicitor will have to deal with the repayment of the existing mortgage and the setup of the new one. Most mortgage lenders now offer either a free legal incentive as part of their mortgage process, which would cover this or a cashback paid to you which will help pay for the legal costs if you decide to go with another firm. We have previously found that although there are obvious benefits to the legal service being free with that incentive, the admin service levels can be tedious, so we always try and allow plenty of time for this to happen or if it’s urgent to take the cashback and appoint a solictor.

Pros and Cons of option for remortgaging

PROS

• You can potentially access the most competitive produces on the market place
• You can raise further funds for a range of different reasons
• You can adjust the term of the mortgage

CONS

• The process can take four to six weeks to complete
• Full underwriting, property valuation and conveyancing is needed

For those who aren’t familiar with our mortgage service, we typically do not charge any broker fees, so there is no cost to you for going with us. We receive a so-called ‘Procuration fee’ from whichever lender is used, which should cover our time.