Product Transfer or Remortgage? Which Route Is Right for You

What is a product transfer?

A product transfer is when you move to a new mortgage deal with your current lender when your existing rate ends.

You keep the same loan, the same outstanding balance and the same lender.

All that changes is the interest rate product. There is no new legal work, no conveyancing, no change of registered charge, and in most cases no valuation of your property. It is an internal switch and it can usually be arranged quickly – often within days rather than weeks. Your lender is likely to have a deadline in place for the switch to happen on time , so make sure that you take action well in advance of this.

Because you are not borrowing any additional money and are staying with the same lender, most product transfers do not involve an affordability assessment; the lender is not usually required to re-check your income, your outgoings or your wider financial position in the way it would for a brand-new mortgage application.

When your mortgage is made up of more than one part

Not every mortgage is a single loan. Where someone has ported their mortgage and taken a top-up, or taken out a further advance, they will often end up with two (or more) loan parts, each with its own separate product, with its own interest rate and, importantly, its own end date.

This is common where borrowing has been added over the years and it affects the product transfer versus remortgage decision in a significant way.

Because each part can have a different end date, they rarely all become free of Early Repayment Charges at the same moment. A full remortgage repays the whole mortgage in one go so can trigger Early Repayment Charges on any part that has not yet reached the end of its fixed period.

Those charges can easily outweigh the benefit of a better rate elsewhere.

A product transfer, on the other hand, can be handled part by part.

You simply take a new product with your existing lender on the part whose rate is expiring, while the other part (or parts) stays on its existing product, untouched, until its own end date arrives. That avoids the Early Repayment Charges a full remortgage would trigger, and stops the expiring part from dropping onto the lender’s Standard Variable Rate.

The example below shows how this works at its most basic level.

Every case is different, and the right answer comes down to the numbers: the size of each part, the rates on offer, and exactly when each end date falls.

There is also often a longer-term question of whether the product end dates can gradually be brought closer together, so that a full remortgage becomes possible at some point in the future – but that is a conversation for your individual circumstances rather than a general rule. This is exactly the kind of calculation we work through for you at Drake before recommending a route.

What is a remortgage?

A remortgage means moving your mortgage to a different lender.

The new lender will carry out a complete affordability assessment, run a full credit search, underwrite the case properly and usually require a valuation of your property. There is legal work involved too, although many remortgage deals come with free conveyancing or cashback to offset some of the legal costs as part of the lender’s package.

The great advantage of a remortgage is choice.

Instead of being limited to whatever your current lender offers, you have access to the whole market. That can mean a materially better interest rate, a more suitable product structure, or the ability to raise additional capital – for home improvements, debt consolidation or other legal purposes – provided the borrowing is affordable and fits the lender’s criteria.

When your finances are strong and stable, a remortgage often delivers the best overall outcome.

You can learn more in our Guide to Remortgages.

Why the affordability difference matters so much

This is the point that catches a lot of borrowers out, and it is the single most important distinction between the two routes.

A remortgage is assessed against your circumstances today – not the circumstances you had when you first took out your mortgage.

If your income has fallen, your outgoings have risen, you have more children, or you have taken on additional commitments since your last application, the new lender is assessing a very different picture.

That additional debt does not have to be another mortgage. Any additional credit commitment or increase in household costs can all reduce the amount a lender will now consider you able to afford.

Someone who comfortably passed affordability three or five years ago may find that they do not fit within a new lender’s affordability calculation even though they have never missed a payment and manage their money perfectly well.

A re-mortgage involves a full credit search and fresh underwriting.

If your credit history has changed – perhaps a missed payment, a default, a County Court Judgment, or simply a heavier reliance on credit than before – that can narrow your options or push you towards specialist lenders and higher rates.

A product transfer, by contrast, generally does not put you through that full reassessment. Your existing lender already holds your mortgage and, in most cases, will offer you a new rate without re-testing affordability or scrutinising every recent change to your credit file.

In short: if your financial position has weakened since you took out your mortgage, a product transfer may allow you to secure a new deal that a remortgage simply would not offer.

For borrowers in that position, staying put is not settling for second best – it can be the most realistic route available.

A quick comparison

So which one should you choose?

There is no universal answer, because the right route depends entirely on your circumstances. As a general guide, a product transfer often suits you if:

• Your income has reduced, become less predictable, or your outgoings have increased.
• You have taken on additional borrowing – secured or unsecured – since your last application.
• Your credit history has changed and you are concerned a full credit search may count against you.
• You want a new rate quickly, with minimal paperwork and no legal work or valuation.
• You are simply happy with your lender and your current rate is competitive.

A remortgage tends to be the stronger option if:

• Your finances are stable and you would comfortably pass a full affordability assessment.
• Your current lender’s renewal rates are uncompetitive compared with the wider market.
• You want to borrow more and can evidence that the additional lending is affordable.
• Your circumstances or property mean a specialist lender would suit you better than your current one.

Why it pays to have both routes reviewed

The mistake we see most often is borrowers accepting whatever renewal rate their lender emails them, without checking whether a remortgage would have been better – or, at the other extreme, applying to remortgage without realising their affordability no longer stacks up, only to be declined and left scrambling as their existing rate expires.

Both situations are avoidable with the right advice at the right time.

Because we handle both product transfers and remortgages ourselves at Drake, we can review the two side by side before you commit to either.

We will look at your current lender’s retention offers, compare them against the whole of the market, and assess honestly whether a full remortgage application is likely to succeed given your present income, outgoings and credit position. Where a remortgage would leave you better off and is realistically achievable, we will tell you. Where a product transfer is the safer, faster or only viable route, we will tell you that too – and arrange it for you.