Most homeowners weigh the pros and cons of remortgages and secured loans for the purpose of finding the most fitting financial solution for them. For all the things that you need to know about secured loans and remortgages before making any financial move, read on. 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. 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. According to these financial experts, you will fare better in terms of your finances in majority of occasions when you choose a secured loan option.
One such example is when a mortgage borrower will be dealing with a significant redemption penalty on their current mortgage. Penalties are earned by the borrower when they intend to switch lenders or only wait for a cheap rate period to pay off a portion of their mortgage. 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. 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.
According to financial experts, you can determine which of the two financial solutions bring you the most advantage when you compare the total cost of the remortgage process with secured loans. Borrowers who have a poor credit history can benefit from this method. If you took your mortgage before facing a credit problem, you may have to pay for a much higher interest rate for the whole mortgage if you take in a remortgage to get extra cash. If you get a secured loan, however, you can benefit from a prime interest rate on your mortgage as a borrower. At the same time, for your new loan, you will only be charged a non-conforming rate.
When you decide between the two financial options, you also need to look into the speed by which the additional funds will be given to your account. Typically, funds for secured loans are much faster to obtain than those from a remortgage.