Deciding between a secured loan or remortgage can be confusing. A crucial fact is that secured loans allow you to borrow against an asset, like your home. Our blog breaks down both options to help you decide which path suits your needs best.
Keep reading for clarity on secured loans vs remortgaging.
Understanding Secured Loans
Secured loans offer a way to borrow money using an asset as collateral. This option can provide larger loan amounts and potentially lower interest rates.
How Do Secured Loans Work?
Secured loans let individuals borrow money using their assets, commonly property, as security for the personal loan. If you decide to take out a secured loan, your lender has the right to take possession of the asset if you fail to repay the loan as agreed.
This type of borrowing is often considered when someone needs a substantial amount of money and can be seen in forms such as second-charge mortgages.
Rates for secured borrowing may be higher than those for primary mortgages because lenders view them as riskier. This means that even if your property gets repossessed, you might still owe money from a secured loan or second-charge mortgage that wasn't covered by the sale of your home.
Pros and Cons of Secured Loans
Secured loans offer the advantage of quick processing, making them a suitable choice if you need funds fast. This expedited process, often achievable in one day for personal loans with a low loan-to-value (LTV) ratio that doesn't require a property valuation, stands out as particularly beneficial for those who find themselves in urgent financial situations.
Moreover, these loans come with more flexibility for applicants who have variable income streams—ideal for individuals who have recently changed jobs or those without filed accounts. Also, you may be wondering are secured loans easier to get? And generally, yes because you are placing your home as a guarantee for the payments.
On the flip side, secured loans may carry higher rates compared to initial mortgages due to the increased risk lenders undertake. Also, should your property be repossessed and sold, any outstanding balance on a secured loan might remain unpaid after the first mortgage provider takes its share of the sale proceeds.
The choice between what is a secured "loan vs remortgaging" hinges on evaluating these pros and cons carefully within your financial context.
Exploring Remortgaging
Exploring remortgaging opens new financial doors. It allows homeowners to renegotiate their mortgage terms for better deals or rates.
What is Remortgaging?
Remortgaging means taking out a new mortgage on an existing property, often to replace the current mortgage or to borrow money against your property. Homeowners frequently choose to remortgage as their go-to method when they need to release equity from their home because it typically presents the cheapest way to access further lending.
Most lenders will allow you to remortgage up to 90% of your property's value (Loan To Value - LTV), making it a preferred option for many looking for more funds.
By opting for remortgaging, individuals can potentially secure lower interest rates compared to their original loan, which might lead them to save money over time or reduce their monthly payments.
Since most people should remortgage at some point during homeownership, understanding these benefits becomes crucial in making informed financial decisions. Whether it’s for home improvements, consolidating debts, or simply seeking better terms, remortgaging offers a pathway to achieving those financial goals with possibly less strain on one’s budget.
Pros and Cons of Remortgaging
One major advantage of remortgaging is that it usually offers the most cost-effective method for homeowners to access additional funds. Many choose this option as their first port of call when they aim to release equity from their homes, making it a preferable route over secured loans for some.
On the flip side, those interested in interest-only mortgages might find themselves at a disadvantage since these products are less prevalent compared to options available within secured lending.
Furthermore, individuals looking for higher loan-to-value (LTV) remortgages might face challenges. Most lenders place a ceiling on remortgages up to 90% LTV, limiting options for those needing more considerable borrowing amounts relative to their home's value.
This restriction can make securing the needed funds more difficult than initially anticipated, especially when compared with some secured loan offerings that may provide more flexibility in terms of LTV ratios.
Choosing a Secured Loan
Deciding on a secured loan can open doors for those needing extra funds. Consider this option if asset-backed borrowing matches your financial landscape.
Suitable Scenarios for Secured Loans
Secured loans shine in specific situations, particularly for individuals facing challenges with a bad credit history, including those who have County Court Judgments (CCJs) or have been bankrupt.
These loans provide an avenue for borrowing by leveraging assets as security, making it possible to obtain funds even when traditional unsecured loans options might not be available due to credit issues.
People who currently benefit from excellent mortgage rates can also find secured loans a better choice than remortgaging since they allow the preservation of favorable existing mortgage conditions.
Moreover, if you need money quickly, having your loan secured stands out thanks to their fast processing times—often within one day. For those looking at interest-only payments or aiming for a higher Loan-to-Value (LTV) than typically offered with unsecured lending options, securing a loan against property can offer these flexible terms.
Key Considerations for Secured Loans
Opting for a secured loan could be the smarter choice if you're aiming to access funds quickly without changing your existing mortgage rate. These loans often come in handy, providing more flexibility than a remortgage in certain situations.
Before jumping into this option, it's crucial to weigh the conditions, especially because secured loans typically carry higher interest rates compared to primary mortgages.
Making an informed decision involves understanding that while what is a secured loan may offer quicker fund release and the ability to maintain current mortgage terms, potential borrowers need to assess their willingness to pay potentially higher rates over time.
This factor plays a significant role in determining whether securing additional financing through these means aligns with one’s financial strategy and long-term goals.
Opting for Remortgaging
Choosing to remortgage can offer a fresh financial perspective. It lets homeowners find new ways to manage their mortgage payments effectively.
Suitable Scenarios for Remortgaging
Homeowners looking to release equity often find remortgaging as their first choice. This method stands out as the most cost-effective way to access further lending, especially for those with a stable income and an impressive credit history.
It becomes an attractive option for individuals aiming to consolidate their debts while enjoying lower interest rates. By choosing remortgage over a secured loan, borrowers can manage their finances more efficiently and potentially save significant amounts in long-term interest payments.
For people considering whether is secured loan is better or not, turning to remortgaging provides clear benefits under specific conditions. If the goal is to lower monthly repayments or secure a better interest rate than the original mortgage offered, remortgaging emerges as a superior solution.
It's particularly suitable for homeowners who have seen improvements in their financial standing or have a good credit score since taking out their first mortgage. Consequently, they unlock more favorable terms that align with their current financial goals and capabilities.
Key Considerations for Remortgaging
Before opting for remortgaging, borrowers must evaluate their eligibility based on stable income and a clean credit history. These factors play a crucial role in determining whether lenders view them as low-risk.
It's also vital to explore the overall costs associated with remortgaging to ensure that the benefits outweigh these expenses. Since interest-only remortgages are harder to secure and high LTV (Loan to Value ratio) options above 90% are scarce, considering the available loan types and terms becomes essential.
Lenders typically limit remortgage offers to up to 90% LTV, making it important for borrowers to assess their property's value accurately against their desired loan amount. This step is critical in avoiding any unexpected challenges during the application process.
After understanding these considerations, individuals can make informed decisions about whether remortgaging suits their financial needs.
Moving forward, let's discuss services offered by Revolution Finance Brokers and why selecting them could benefit your financing strategy.
Services by Revolution Finance Brokers
Revolution Finance Brokers offer guidance on deciding between secured loans and remortgaging. They provide support to help you make the best financial decision for your situation.
Why Choose Revolution Finance Brokers?
Choosing Revolution Finance Brokers means opting for an easy process to secure an excellent mortgage offer quickly. Start by completing a quick form, then submit your application and finalize the details of your mortgage without hassle.
Their experienced team is ready to assist you through each step, ensuring a smooth journey toward securing your loan. If any questions arise or further assistance is needed, reaching out is simple: just dial 0330 304 3040 or send an email to [email protected].
Engaging with Revolution Finance Brokers opens up opportunities through their referral program. Both referrer and referee benefit by receiving £25 each after a new mortgage application is completed successfully.
This unique offering provides financial support and encourages satisfied clients to share their positive experiences with others looking for reliable brokerage services.
FAQs
1. What is a secured loan?
A secured loan is money you borrow that is backed by an asset, like your house.
2. What does remortgaging mean?
Remortgaging means you get a new mortgage to replace the one you already have on your home.
3. Which costs less in the short term, secured loans or remortgaging?
Secured loans often cost less in the short term than remortgaging.
4. Can I borrow more money with a secured loan or by remortgage?
You might be able to borrow more money by remortgage compared to getting a secured and unsecured loan.
5. Can I Pay Off A Secured Loan Early?
You can pay off a secured loan early but you make to pay some early repayment charges and fees.
