With the increased costs involved to refinance within a Ltd Company, we are seeing more and more lenders introducing retention products, such as product transfers.We explain why product transfers are becoming important.
What is a product transfer?
A product transfer is transferring your current mortgage deal (when you do not need to increase the loan amount) to a new product with the same lender, typically at the end of the fixed rate period. This is a simple process which doesn’t involve the fees associated with a refinance.
A refinance to a new lender would usually involve an application fee, valuation fee, arrangement fee and legal fees, not to mention all the new paperwork to complete and sign.
A product transfer is a much easier process which involves minimal work. There is no need for a new valuation to be carried out and there is also no legal work involved, saving on legal fees. Depending on the lender, there may be a new arrangement fee to pay, but this would usually be the only fee to consider.
Why are product transfers important for Ltd Companies?
The cost of refinancing a Limited Company Buy to Let mortgage is expensive. Arrangement fees are typically higher for these transactions. The legal fees are also a lot more expensive than individual name transactions. Limited company arrangement fees can be as much as 2% of the loan amount.
Typically, residential mortgages are refinanced every 2-3 years because the cost to refinance to a new lender is very low. For example, many lenders offer products with incentives such as free valuations, little or no product fees and free legal services, meaning the upfront costs to the client are very low.
Limited Company mortgages, however, do not offer as many products with such incentives. This means the overall upfront costs to refinance to a new lender are higher.
Do you, as a landlord want to avoid having to go through the whole application process again? Are you looking to keep costs to a minimum at the end of your fixed rate term?
How we can help
If so, our aim is to find you either: a product with a low reversion rate or, to ensure you have a mortgage arranged with a lender that offers a product switch process at the end of the initial fixed rate period.
For more information on this, please get in touch to see the options available to you.
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Megan Parkin – Property Finance Adviser
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