Why a Remortgage Will Always Be More Desirable Than a Secured Loan
If you are a home owner and need to access some extra finances, there are various different options available. Two of the best known ways of borrowing against the value of your home are a secured loan and a remortgage.
Remortgaging is the process whereby you switch your mortgage from one lender to another without moving home. Many remortgage lenders will also allow you to borrow additional money at the same time depending on your income and the amount of equity that you have in your home. When the remortgage has completed you’re left with one lender and one loan.
Secured loans are just like personal loans, except that they are placed as a ‘charge’ against your property. So the loans company would own part of your property until you repay the loan in full. It is worth mentioning however, that secured loans are often on higher interest rates.
There are situations where a secured loan might be a better course of action for you than a remortgage. For example, if you want to borrow extra cash but you don’t want to switch your mortgage to another lender – perhaps you have an excellent fixed rate deal on your mortgage – then a secured loan may help you. Homeowner loans are also often easier to obtain than a remortgage if you have some adverse credit or you are self employed.
Remortgages are usually the better option however. This is because a mortgage is always repaid first in the event of a default on the loan, which means that they are lower risk than secured loans. Another reason is that the interest rates are generally far lower than on secured loans. The difference can be as much as 10%. As you can see from that figure, you would save a lot of money and could reduce monthly outgoings by taking a remortgage rather than a secured loan.
The lower remortgage rates also means that your money goes further and you can secure a great deal on both your existing mortgage and the added funds you are borrowing. You might be able to access a fixed rate or a discounted/tracker deal on your additional borrowing. As a secured loan is not part of your main mortgage, the interest rates will normally differ.
The fees that you incur from remortgaging are also often a lot lower than those of an unsecured loan, so you would be saving in more than one way by opting for the remortgage.
A remortgage can also keep your finances simple and easy to manage. Whilst a secured loan will generally result in double the paperwork, two direct debit payments and having to correspond with two lenders, a remortgage keeps your borrowing in one place making it easier to control and manage your household finances.
A remortgage deal leaves you with just one lender, one mortgage to pay and only one payment per month. There is no need to worry about multiple creditors or having more than one creditor to pay every month.
Whatever you need to borrow additional money for, secured loans and remortgages are two of the most common ways that homeowners access the equity in their property. As there are advantages and disadvantages to both types of borrowing it’s vital that you do your research in order that you pick the right type of deal for you.
Timothy Frodsham writes for JustRemortgages.com one of the UK’s
top sites for the latest remortgage rates and best remortgage deals.