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. For quite some time, a lot of people considered remortgages as a cheap method 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. For these financial experts, there are more instances when a secure loan will be a wiser and better financial option than a remortgage.
Take, for instance, a mortgage borrower on their current mortgage facing a large redemption penalty. Borrowers acquire penalties when they express to switch lenders or decide to only pay off their mortgage at a period when rates are cheap. You have to remember that the terms and conditions from one lender to the next also vary. Some mortgages with fixed rates may carry up to 7% of penalties of the outstanding balance of the mortgage if the borrower redeems it during the fixed rate period.
The overall loan cost is one of the crucial factors that you need to consider if you decide between secured loans and remortgages. As you compare between these two financial options, the APR can be a helpful tool because it also includes associated charges and fees into consideration. 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. On the other hand, with secured loans, you will only be dealing with very few additional fees, which often encompasses only the lender’s arrangement fee as well as 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. This step is very important for borrowers who have 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. At the same time, for your new loan, you will only be charged a non-conforming rate.
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. Typically, funds for secured loans are much faster to obtain than those from a remortgage.