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. They thought about this because the interest rates you get on a mortgage are far less than those you get on an unsecured loan. In the present, though, if you want to raise money, financial experts advise against remortgaging because of the increased regulation and Financial Services authority that have come about in current years. 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. It is important to remember that each lender also has varying terms and conditions. Your penalties can go as high as 7% of your outstanding mortgage balance from you fixed rate mortgage if you get them during the period of fixed rate.
For you to know which is the most financially sound decision between secured loans and remortgages, you have to consider the overall loan cost. A handy tool that you can use to compare between the two choices will be the APR that will also take into account associated charges and fees. When it comes to processing remortgages, a lot of fees are involved in the process such as broker fees, lender fees, administration and valuation fees, and even 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.
Based on financial expert advice, you can find out which financial solution benefits you the most when you compare secured loans with the total remortgage process costs. Borrowers who have a poor credit history can benefit from this method. For mortgages taken out before facing any credit problems, getting extra cash through a remortgage may mean paying a higher interest rate for your total mortgage. Meanwhile, getting a secure loan means benefitting from a prime interest rate on 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.