Secured Loans vs. Remortgages: Finding the Most Suitable Financial Solution for You
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. 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. However, with increased regulation and Financial Services authority in the past years, most financial experts will advise you against remortgaging if you want to raise some money. 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. 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. You have to remember that the terms and conditions from one lender to the next also vary. Your penalties can go as high as 7{04849f042c7cb443b7662682bd07cdfba2107aae915afd40cfa4fe5ab1f7731b} of your outstanding mortgage balance from you fixed rate mortgage if you get them during the period of fixed rate.
When it comes to deciding between secured loans and remortgages, it will be best to consider what the overall cost of the loan will be. 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. 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.
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. Borrowers who have a poor credit history can benefit from this method. 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.
As you choose between these two financial solutions, make sure to also consider the speed by which you can get your additional funds transferred to your account. Mostly, you will get funds faster from secured loans than from a remortgage.