• Chris Warner

Product transfers or rate switches

What is a product transfer or a product switch? It is very common these days for clients that have an existing mortgage to be offered a product transfer when coming to the end of their current deal.

An example of a Product transfer: Mr & Mrs A have their mortgage with ABC Bank and are coming to the end of their 5-year fixed rate deal. They have received a letter from ABC Bank confirming that their payments are about to move onto the Standard Variable Rate (SVR) and their payments will increase. As long as the amount of mortgage is to remain the same and they are happy to stay with ABC Bank they could take a new fixed rate with them ensuring their payments remain stable.

Using the example above, this might not always be the best option available based upon your individual circumstances. Some clients aren’t even aware that a product transfer is an option for them and end up moving onto the lender Standard Variable Rates, then typically start paying much higher payments than they were on their previous deal.

You should seek advice from a qualified mortgage expert when considering these options, to make sure that this is the best course of action for you at this time. More often than not, I speak with clients who went ahead with a product transfer offered by their current lender, a year or so earlier to save money, but are now looking to move and will incur a hefty penalty for leaving the new deal early.

Using the example above, Mr & Mrs A took out the product transfer offered to them by ABC Bank but knew at that time Mrs A was pregnant and so would be looking to move home in the near future for more space. They will now incur a large penalty fee for repaying their mortgage early as they took out the new fixed rate offered to them by ABC Bank thinking it was saving them money.

Had they had a conversation with us at that time we would have looked at their current circumstances and spoken to them about future plans so they could be offered the best advice and potentially avoid high early redemption charges in the future. Obviously, no one has a crystal ball, but we can try to protect you from these types of scenario as best as possible.

I am not saying that product transfers or switches aren’t great for some clients, they are! It is just that you need to make sure you weigh up all the options available to you before committing. A qualified mortgage adviser can give you this information and peace of mind.

We offer product transfer advice free of charge and can even help you with the application process, so you have very little to do. We can complete the application on your behalf and liaise with your mortgage lender. We would make sure you are put onto the best rate for your circumstances. I aim to make the whole process as straight forward as possible and in many cases it may not cost you anything at all.

Please remember, your home may be repossessed if you do not keep up repayments on your mortgage or any loan secured against it.

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