Following the initial mortgage application, the original mortgage terms will come to an end and then commonly homeowners seek to re-mortgage.
The benefits of re-mortgaging can be large savings as well as locking in preferred rates for another set period of time.
When re-mortgaging homeowners can search the wider mortgage market in order to find the best terms, or remain with their current provider, which may not result in the most competitive terms however can save on paperwork and time.
In this post, we will discuss the benefits and downfalls of re-mortgaging with the same lender, as well as cover the common terminology used within the re-mortgaging process and review the process itself of re-mortgaging with the same lender.
What is a Product Transfer?
The term product transfer is commonly used within the mortgage industry when a policyholder switches mortgage product with the same lender.
The terminology ‘remortgaging does not necessarily relate to the current provider, but more the process of switching to a new rate, mortgage term, loan amount or other different feature.
Depending on the current terms of a mortgage, there could be savings to be gained on interest rates by re-mortgaging however, typically other fees are applicable during a re-mortgage, such as valuation fees, arrangement fees and solicitor fees and therefore a full costing of the option should be undertaken before proceeding.
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What are the Benefits of remaining with the Same Lender?
The main benefit of remortgaging with the same lender and simply switching mortgage product is that the process is much easier. Usually, the process involves a conversation regarding the products on offer and their associated rates of interest.
Once the product selection is made, the mortgage will switch over without the requirements of extra checks and some of the fees as incurred with a re-mortgage to a new lender.
Switching lenders requires a new mortgage application to be made, including meeting all of the eligibility criteria and affordability checks, as well as a property valuation and legal representation.
Another benefit of a product transfer is to avoid the common automatic switch to a standard variable interest rate which is likely to cost the homeowner more money in repayments and interest.
What are the Disadvantages of remaining with the Same Lender?
Although it is easier to stay with a current mortgage provider, there may be downsides of doing so as follows:
The wider mortgage market is not approached
It is highly likely that the current lender will only offer a small range of products for a product transfer and therefore to obtain the most competitive mortgage rates and terms, it is often beneficial to search the wider mortgage market in order to compare a range of products.
To put this in context the current lender may offer a handful of product transfer options, whereas if the wider mortgage was reviewed, there could be thousands of products to compare.
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Missed opportunity for a Property Valuation
It is common that when the property is first bought with a mortgage, that a full property valuation is carried out to evaluate both the price and condition of the property for the purposes of the mortgage lender.
The valuation of the property is critical when calculating the loan to value, or LTV ratio for the lender, which often is linked to the interest rate offered on the mortgage.
However, when a product switch takes place without the requirement of a property valuation, any inflation in the property price has not been captured, which can limit the level of borrowing potential available.
It would depend on the homeowner’s circumstances if this is a big deal, although usually if the property price has increased, the loan to value would decrease resulting in preferred interest rates being offered. Not all remortgages arrange a new valuation.
Affordability Improvements not being Captured
Often a couple of years would have passed since either the initial mortgage application or a previous re-mortgage and therefore the homeowner’s personal circumstances may have improved either by promotion at work or reduce expenses such as childcare costs ending, therefore improving the affordability.
As briefly mentioned, when transferring mortgage product with the same lender, there may be limited mortgage options, whereas if a full market search and new mortgage application was made, there may be more flexible options available such as decreasing mortgage payments to increase the disposable income or, repaying a proportion of the mortgage off without incurring early repayment fees during a mortgage term.
Another option homeowners may wish to consider is borrowing more money during the process of re-mortgaging which wouldn’t usually be possible with a simple product transfer with the same lender although a further advance may be available with the current lender.
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What is the Difference Between Product Transfer and Porting?
The process of porting a mortgage occurs when a homeowner opts to move to a new house but there is the option of transferring the mortgage with the same lender to the new property. Not all lenders allow mortgage porting and therefore to find out more it is worth liaising with your current lender as soon as possible, to clarify if this is an option.
If porting is not an option, a new mortgage application will be required against the new property, incurring the associated fees with a new product as well as any early redemption fees if due.
Porting is therefore differing from a product transfer where the property and lender remain the same.
How long does a Remortgage Process Take with the Same Lender via Product Transfer?
The process of switching mortgage product with the same lender is typically very quick as no third parties are involved to complete extra checks.
Remortgaging with the Same Lender Summary
In this post, we have discussed the process and terminology used when transferring to another mortgage product with the same lender.
We have also explored the pros and cons of staying with the same lender, however, if you have any further questions or would like a full review of your personal circumstances including whether staying with the same mortgage lender is the most competitive option, please do get in touch to book an appointment with one of our team.
Call us today on 01925 906 210 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.