Remortgaging versus Secured Borrowing

You may find it somewhat surprising to think that, when it comes to remortgaging, many borrowers remain completely unaware that another option exists. Recently, a growing number of independent finance advisers have begun to advise their clients of a unique range of secured borrowing products, which can sometimes be of much greater benefit to the homeowner in search of additional funds.

To understand the suitability of each borrowing product, it is important that you know the basic differences between a secured loan and a remortgaging option, so we’ll take a look at each one in the next couple of paragraphs.

What are secured loans?

A secured loan is a long-term borrowing product where the loan amount is secured against something of value. This is usually a homeowner’s property, and this is the main reason that secured loans are often referred to as homeowner loans. Whereas personal loans have an upper ceiling of around £25k, a secured loan is only limited by the amount of equity that a homeowner is able to offer, a figure that is worked out by subtracting any outstanding mortgage debt from the market value of a property. When applying for a secured loan, it is important to realise that your home could realistically be repossessed should you fail to make payments on time, either deliberately or through no fault of your own.

What exactly is a remortgage?

A remortgage is very similar to a secured loan in that the borrower is offered a loan amount in direct relation to the amount of equity they are able to provide. However, unlike a secured loan, which may or may not be secured against a homeowner’s property, a remortgage will typically always require the applicant to put their home at risk in the event of non-payment. With a secured loan, it is quite possible to offer other types of collateral against the amount you are seeking to borrow.

Another difference between a remortgage and a secured loan is that most remortgaging products can only be used for a limited range of reasons, such as home improvement. With a secured loan, the borrower can typically use the funds for any purpose they see fit. On top of this, the remortgaging application process is often quite complicated and can take a considerable amount of time to complete.

When you choose a secured loan

It is usually in your best interests to apply for a secured loan whenever you need to borrow a considerable sum of money over a substantial length of time. Secured loans are also the ideal option whenever you require the funds for reasons other than home improvement, although they can also be used for this purpose if this is what you are looking to borrow for.

Unlike remortgaging products, secured loans can be taken out against additional properties that you own other than your primary residence, and they can even be used for commercial reasons such as expanding a business or to secure new assets for a self-employed venture.

Although secured loans are typically much easier to apply for, with the funds being released in a matter of just two or three weeks, both products offer unique advantages, so it always pays to do a little research and seek sound borrowing advice from an FCA-approved broker or independent adviser before deciding on which product to apply for. Work out the costs of a mortgage using our UK mortgage calculator.