How a BTL mortgage product transfer works
A product transfer involves the existing lender offering a new deal from their current product range, typically 3-6 months before the existing deal expires. The product switch is processed without a full affordability re-assessment (typically), without a new solicitor, and without a new valuation. The new rate commences from the deal expiry date to avoid ERCs on the existing deal.
SVR trap: what happens when a BTL deal expires
When a BTL mortgage deal expires and no product transfer or remortgage has been arranged, the mortgage reverts to the lender's SVR, typically 2-5% above Bank of England base rate. SVRs are almost always significantly more expensive than available fixed or tracker products. For a £200,000 BTL mortgage, the difference between a 4.5% two-year fix and a 7.5% SVR is £500 per month, or £6,000 per year. Arrange a product transfer or remortgage 3-6 months before deal expiry.
ERC: early repayment charge and within-deal switching
Most BTL fixed rate mortgages impose an ERC if the mortgage is redeemed within the deal period, typically declining from 5% in year 1 to 1% in year 5. For a same-lender product transfer (no redemption), the ERC does NOT typically apply. Where breaking a deal early is considered, calculate the ERC payback period: ERC divided by monthly rate saving; if the payback period is shorter than the remaining ERC term, early switching may be cost-effective.
Product transfer vs remortgage to new lender
Product transfer advantages: no solicitor's fees; no new valuation (typically); faster (days not weeks); no full affordability re-assessment (typically); stays with existing lender; useful for portfolio landlords avoiding new-lender underwriting. Remortgage to new lender advantages: access to market-wide product range; may offer better rates; allows loan amount to change (equity release or reduction); useful when LTV has improved significantly.
PRA SS13/16 portfolio landlord specialist underwriting
Landlords with 4 or more mortgaged BTL properties face specialist underwriting requirements under PRA SS13/16 (effective September 2017) for any new BTL mortgage application: portfolio questionnaire; schedule of all mortgaged and unmortgaged BTL properties; ICR assessment at portfolio level; stress testing at typically 5.5% with 125% ICR. Product transfers with the existing lender typically require less documentation than new lender applications, making same-lender switches particularly attractive for portfolio landlords.