Can You Be Declined A Product Transfer Mortgage?

Are you thinking about switching to a new mortgage deal in the UK without changing your lender?

It's called a product transfer mortgage, and it's a common choice. But before you decide, there's a crucial question to address:

Can you be turned down for a product transfer mortgage?

In this insight, we'll tackle the question and prepare alternatives.

Key Takeaways

• Product transfer mortgages can be declined, mainly due to credit issues or affordability concerns. However, many lenders skip affordability assessments for existing clients.
• Before opting for a product transfer, carefully assess your financial situation and long-term goals to determine if it's the right choice for you.
• A strong credit history is vital, and lenders may examine your income and financial commitments, but not all require income proof.
• Product transfers with your existing lender are often streamlined, involving less paperwork and credit checks compared to switching to a new lender. However, the ease can vary based on circumstances and lender policies.

Can You Be Declined A Product Transfer Mortgage?

Yes, you can be declined for a product transfer mortgage. Although it is rare, there is often a specific reason why you may have been declined. For example, if the lender stops doing business to encourage you to remortgage away.

After Northern Rock suffered financial difficulties in 2009, they restructured their mortgage business into two entities. One was Virgin Money, which took over the good debts, and the other was NRAM, which handled the bad debts. NRAM offered no product transfers and existed solely to service the bad mortgages that had been issued. For many people, they are unable to remortgage away from NRAM, leading them to become mortgage prisoners, trapped on a high standard variable interest rate. Those people would have been declined any attempt to arrange a product transfer.

When applying for a product transfer mortgage, it's crucial to be aware of the factors that could lead to your application being declined. While product transfer mortgages are typically less complex than remortgaging with a new lender, there are still certain criteria that lenders consider to determine if you qualify for their mortgage deals.

What is a Product Transfer Mortgage?

A product transfer mortgage, also known as a mortgage switch, is a type of refinancing option that allows you to switch from your current mortgage deal to a new one offered by your existing lender. Unlike remortgaging, which involves switching lenders, a product transfer allows you to stay with your current lender while benefiting from potentially more favourable interest rates and terms.

Product transfers are typically offered by lenders when your initial mortgage deal is coming to an end. At this point, you may be automatically placed on your lender's standard variable rate (SVR), which often comes with higher interest rates and monthly repayments. Opting for a product transfer can help you avoid the SVR and secure a new deal that better suits your financial needs.

How Does a Product Transfer Work?

The process of a product transfer is generally straightforward, especially if you're not looking to borrow additional funds or change the term of your mortgage. Since you're staying with your current lender, the paperwork and administrative tasks involved are often minimised. This means that, in some cases, you can complete the product transfer in just a few days.

Factors that can Lead to a Declined Product Transfer Mortgage

One of the primary factors that lenders assess is your credit score. Your credit score reflects your creditworthiness and helps lenders determine the risk associated with lending you money. If your credit score has dropped significantly or if you have a history of missed payments, defaults, or CCJs (County Court Judgements), it could negatively impact your chances of getting approved for a product transfer mortgage.

Another crucial aspect that lenders consider is your income and affordability. Lenders want to ensure that you have a stable income and are capable of making your mortgage payments. If your income has recently decreased or if you have taken on additional financial commitments, such as personal loans or credit card debt, it may affect your affordability, making it more challenging to secure a product transfer mortgage.

Do Lenders Conduct Affordability Assessments For Product Transfers?

Many lenders do not conduct affordability assessments when completing product transfers, meaning that a high percentage of cases, approximately 99%, are accepted. However, this can vary among lenders, and it's essential to enquire about their specific policies and requirements during the product transfer process.

Do You Have To Prove Your Income For a Product Transfer?

No, in most cases, you do not have to prove your income when completing a product transfer with your existing mortgage lender. This is one of the advantages of opting for a product transfer instead of a remortgage with a new lender.

When you choose a product transfer, your lender already has your financial history and information on file from your existing mortgage. Since they are not taking on new business risk, they typically do not require you to provide updated proof of income or conduct a full affordability assessment.

Do Product Transfers Involve a Credit Check?

Whether a credit check is required for a product transfer depends on the specific circumstances, especially if you're seeking a further advance. If you're only switching to a new deal without borrowing additional funds or changing the terms of your mortgage, a credit check may not be necessary.

However, if you're applying for a further advance, your lender will likely conduct a comprehensive assessment of your income, expenses, and creditworthiness. This is to ensure your affordability and assess the risk associated with lending you additional funds.

A hard credit check is typically performed during the application process for a further advance, allowing the lender to review your credit score and assess any recent financial issues such as bad credit, payday loans, county court judgements (CCJs), individual voluntary arrangements (IVAs), or bankruptcy. These factors can influence the approval of your product transfer application.

Is a Product Transfer Easy?

A product transfer can be relatively easy compared to remortgaging with a different lender. It typically involves switching to a new mortgage deal with your existing lender. The process may require less paperwork and fewer checks, as your lender already has your financial information. However, ease can vary depending on your circumstances, the lender's policies, and the specific terms of the product transfer. It's essential to compare offers and consider your long-term financial goals before deciding if a product transfer is the right choice for you.

In Conclusion

In conclusion, a product transfer mortgage can be a convenient option for those looking to switch to a new mortgage deal without changing their lender. While it is generally a straightforward process and often does not require income verification or extensive credit checks, there are exceptions, especially if you're seeking additional funds or making significant changes to your mortgage.

It's important to be aware of the factors that could lead to a declined product transfer, such as credit issues or affordability concerns. Additionally, some lenders may have unique policies, so it's advisable to communicate with your lender and understand their specific requirements.

Ultimately, a product transfer can offer the advantage of potentially better interest rates and terms, helping you manage your mortgage more effectively. However, it's essential to carefully evaluate your financial situation and consider your long-term goals when deciding if a product transfer is the right choice for you.