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Product Transfer Mortgages
When you purchase a home, the mortgage lender typically holds the mortgage until it is paid in full. In some cases, however, the lender may transfer the mortgage to another party. This process is called a product transfer mortgage. There are several reasons why a lender might choose to do this, but one of the most common is when the original borrower dies and the estate wants to sell the property. If you’re thinking about purchasing a home, it’s important to understand how product transfer mortgages work and what they mean for you.
The following topics are covered below:
What is a Product Transfers?
When you switch from one mortgage agreement to another with your present lender, this is a product transfer. A product transfer is a lesser-known option that, depending on your circumstances, may be a better alternative to remortgaging, even though the concept is not new. For example, if your lender’s Standard Variable Rate (SVR) has lately gone up owing to increased interest rates, you may want to consider switching to a fixed-rate mortgage plan. This is a product transfer if you want to keep your loan amount the same and your content with your present lender, so you’re only switching products.
In most cases, the product transfer procedure is a piece of cake. Since a formal appraisal of your property is unlikely to be required, this is the best option, unlike when applying for a loan or remortgaging. In most cases, your lender will be able to arrange a product transfer over the phone or in-person quite quickly. Although many high street lenders do not demand this for normal product transfers, the applicant(s) may be required to fill out an income and spending form as part of an affordability check. The borrower will be given a product transfer form to sign once this process is complete and if the credit check is passed. However, only a few lenders may also ask for updated income verification. The entire procedure can be finished in as little as a week if lenders employ property appraisal software that produces data rapidly.
What is needed for a product transfers?
Other than making sure you can stay up with the new repayment values, the process is usually short and uncomplicated because you don’t require a property appraisal or to go through any new eligibility checks. Most lenders will conduct affordability checks after negotiating a product transfer over the phone. Before finalising the transition, your provider will require you to sign a product transfer contract and may conduct a credit check. Your income may be re-evaluated in some situations, although this isn’t always the case.
What rates are available on product transfers?
While mortgage product transfer fees vary by lender, ordinary product transfers are far less time- consuming to complete than a new mortgage application or remortgage, for example, making them a more cost-effective option in many circumstances. The rates offered by their present lender are a common reason why many borrowers choose an alternative to product transfers. Your provider’s rate, for example, could be far greater than what a competitor is offering. You might be tempted to switch providers in this case, which would necessitate remortgaging. While this may appear to be a no-brainer, remember that remortgages take longer to organise and require more stages, which means they can be more expensive – so make sure you can justify the accompanying expenses concerning the interest you’d save through transferring.
Are there any fees on product transfers?
There will be no additional deposit required to switch your mortgage product in most cases. If you’re remortgaging, the standard minimums are as follows:
- On residential properties: 5%.
- buy-to-let homes: 15%
- Bridging loans: 25%
You may be requested to pay a larger deposit if your transfer is higher risk or non-standard.
Where does the client need to sign to accept a product transfer?
Like all mortgage deals, a product transfer is done seamlessly with the aid of a mortgage advisor to understand the details of the deal. Your mortgage advisor/solicitor would guide you on where to sign and how to sign appropriately.
Does the offer confirmation come via post?
Like all mortgage deals, your advisor would fill in all the necessary assessments for you, and you would only need to get the finalised document from their office when the deal is done.