Product transfers are an alternative option if you're not satisfied with your existing buy to let mortgage rates or want to switch to a more competitive product.
Unfortunately, they seem to be something few landlords know about or consider as a viable option - and carry multiple benefits as a way to refinance your current deal and cut back on those interest charges!
Let's explain how a product transfer works and why now might be the best time to give it some thought.
Are There Benefits of a Buy to Let Product Transfer Rather than Remortgaging?
In short, rather than remortgaging, you can apply to switch your buy to let mortgage account to a different product. This switch remains with the same lender, so you won't need to worry about paying fresh valuation fees in most cases.
The process is much quicker and more convenient than a full remortgage. If you did decide to search for an entirely new BTL mortgage with a different bank or lender, you would need to go through the whole system again, including:
- Affordability assessments
- Property valuations
- Income and expenditure reports
- Produce filed accounts or tax returns
- Complete the application paperwork
- Credit checks
Since you're staying with the same lender, they'll already have most of the information they need on file. Sometimes they might need to reassess one or two points, but overall it's a much less laborious task with a lot less paperwork.
Product transfers are also significantly faster than a remortgage. In some cases, they can be completed in just one day - which might make a difference to your cash flow and profits.
For example, suppose you have reached the end of a fixed-term interest period and have ended up paying high Standard Variable Rates. In that case, you're going to want to find a more cost-effective BTL mortgage now, rather than continuing to cover those increased costs for the next couple of months while the remortgage application goes through.
You'll also pay fewer costs, with most lenders not requiring a new valuation (unless something significant has changed since you took out the original mortgage). Arrangement fees are sometimes waived for existing clients, and you won't need to pay legal costs.
All told, if you can find an appealing buy to let mortgage product through your existing lender that is more competitive than the deal you're on now, a product transfer might be the most compelling option.
Do All Buy to Let Lenders Offer Mortgage Product Transfers?
For the most part, yes. Mortgage lenders will always prefer that an existing client sticks with them rather than remortgaging onto another deal with a competitor.
As you're already an approved client and have passed all the eligibility and affordability checks, it's unlikely a mortgage lender would be happy to see you commercial remortgage rather than agree to a product transfer to ensure you stay with them.
The issue with product transfers is that this never happens automatically - after all, it's in the bank's best interests for you to keep paying high SVR rates rather than highlight a cheaper product that will cost you less!
If you do come to the end of a fixed-term interest period, you're going to change over to the SVR rate unless you prompt a change. So although most lenders will be happy to facilitate a product transfer, it's up to you as the property investor to take the initiative.
Should you be within a fixed period, now is unlikely to be an excellent time to look at a transfer, though, as you may incur exit charges or early repayment penalties. However, that all depends on the BTL mortgage product you have and how much you stand to save by switching to a better deal.
Why is Now a Great Time to Look at Buy to Let Product Transfers?
All property investment professionals will be aware that this last pandemic year has been tumultuous, to say the least. Many mortgage lenders have withdrawn products from the market, hiked up rates, or refused applications from new prospective clients.
These steps were all difficult choices but designed to avoid making hasty lending decisions or accepting new customers without having the capacity - during lockdowns, sector closures, and social distancing restrictions - to provide a decent service to each and every client.
Now that we see a gradual lifting of restrictions and house moves are becoming more manageable, many lenders are opening their doors wide open and reintroducing attractive buy to let products to entice those clients back again.
Of course, interest rates aren't the only consideration here. You might opt for a remortgage over a product transfer if:
- You don't feel that you are getting the best service from your lender.
- There are better terms available on other BTL mortgages.
- You want to consolidate your mortgage borrowing with one bank.
- Another lender offers far more competitive mortgage products than are available to switch to with the current provider.
It's all about balancing the costs and benefits to make the right decision. Staying with your existing lender might be a faster and cheaper option in terms of fees, but it doesn't mean that you're going to get the best BTL mortgage on the market, so it's well worth consulting the Revolution team to get an overview of what deals are on the table.
Another consideration is that if you go for a product transfer, you can't leverage your equity in the property to release capital for other investments or projects - so in that situation, a remortgage is your best bet.
How Can I Decide Between a Product Transfer and a Remortgage on a Rental Property?
As always, we'd recommend getting in touch with our BTL mortgage specialists for an independent analysis of the investment property mortgages available.
Over the last few months, the kind of rates and terms on offer may have changed since you took out your current product, so it's a pivotal time to re-evaluate what you're paying and decide which option is the most financially beneficial to you.
Mortgage product transfers are an excellent option if you are looking for a fast and easy way to avoid paying SVR fees, so if you're interested in weighing up the opportunities available, get in touch with the Revolution Brokers team at any time!
Contact us now to discuss your personal options, Revolution Finance Brokers specialise in commercial and residential finance in Essex, Kent, London and Hertfordshire.