Secured Loan vs Remortgage
Secured loans and remortgage deals can be accessible and affordable, with an extensive variety of potential applications. Eligibility is determined primarily on the basis of property values and equity.
Provided you have sufficient equity tied up in your home to cover the costs of a loan, there is a good chance you will qualify for either.
But assuming both options are available, which is the most appropriate choice for your needs? Specifically, what are the primary differences between remortgage loans and secured loans?
As with all financial products, there are pros and cons to consider when choosing between secured loans and remortgage deals. Neither is necessarily ‘better’ than the other and it depends entirely on your requirements, your priorities and your financial circumstances at the time.
Specialist Remortgage Deals
A ‘remortgage’ occurs when an existing mortgage borrower effectively swaps their current deal for an entirely new loan. This could mean switching to a different deal with the same lender or looking for a more competitive deal elsewhere. A remortgage can save the borrower money with a lower rate of interest and more competitive borrowing costs or allow them to raise funds by applying for a larger loan than their outstanding balance.
The latter makes a remortgage a good option for covering the costs of major property improvements and alterations. It can also be comparatively simple to remortgage with an existing lender, as they already have all your information and evidence of your track record.
On the downside, remortgages are typically only issued for a select few applications. Lenders are often willing to offer remortgage deals to fund home improvements and alterations, but little else. In addition, applying for a remortgage with a new lender can be as complex and time consuming as applying for a traditional mortgage in the first place.
Specialist Secured Loans
By contrast, secured loans can be used for absolutely any legal purpose whatsoever. Provided the applicant has sufficient security (aka collateral) to cover the costs of the loan, the intended application for the funds is inconsequential. Credit histories and recent proof of income often play roles of reduced importance with specialist secured loans, where the value of the applicant’s security is the main determining factor.
Many types of specialist secured loans can also be quicker and easier to apply for than mortgages and remortgage deals. There are even some types of secured loans (like bridging finance) that can be paid out in a matter of days.
In terms of disadvantages, some secured loans may attach higher rates of interest than a comparable remortgage deal. This is something that differs significantly from one lender to the next, which is why it is important to consult with an independent broker before applying.
Finding the Best Deal
A reputable broker can help you choose the most appropriate option to suit your requirements and your budget. It is also important to ensure that a whole-of-market comparison is carried out, as your ideal loan may not be available on the UK High Street.