Most homeowners weigh the pros and cons of remortgages and secured loans for the purpose of finding the most fitting financial solution for them. If you plan on understanding remortgages and secured loans better, then you’ve come to the right place. Since time immemorial, a lot of people assumed that remortgage is one of the cheapest means of raising money. This is often the case with how lower interest rates are on a mortgage than those on an unsecured loan. Unfortunately, many financial experts advise against remortgaging today to raise money because of the changes brought about by the Financial Services authority and increased regulation. Based on what these financial experts have deduced, the better financial option these days in most occasions will be a secured loan over a remortgage.
Take, for instance, a mortgage borrower on their current mortgage facing a large redemption penalty. These penalties happen when a borrower decides to only pay off part of their mortgage during a period when rates are cheap or when they decide to switch lenders. Keep in mind as well as that the terms and conditions between lenders are not similar. If it so happens that your redemption will be during your fixed rate period, your fixed rate mortgages may penalize you to a maximum 7% of the balance of your outstanding mortgage.
The overall loan cost is one of the crucial factors that you need to consider if you decide between secured loans and remortgages. If you want to compare between these two financial options and take associated charges and fees into account, then the APR is the perfect tool for you. If you are going to process a remortgage, there are different fees that are involved, namely, administration and valuation fees, broker fees, lender fees, and in some scenarios, legal fees. Meanwhile, secured loans only have a few additional fees, which are often subjected to the lender’s arrangement fee and a broker’s fee.
Comparing between the costs of secured loans and total remortgage process costs is the most effective method of assessing which is the best financial solution for your case according to financial experts. Taking this step is crucial for any borrower with a poor credit history. Most of the time, you will be paying an interest rate that is significantly higher for your entire mortgage when you decide to raise extra money through a remortgage after you have taken out your mortgage before getting into any credit troubles. On the other hand, as a borrower of secured loans, you can take advantage of a prime interest rate from your mortgage. Additionally, only a non-conforming rate will be charged to you on your new loan.
It is equally important to consider the time it will take for the additional funds to go to your account when you weigh between the two financial options. Mostly, you will get funds faster from secured loans than from a remortgage.