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Re-Mortgage your Home or Get a Secured Loan?

May 12, 2008
It's been a sad fact that application fees on fixed rate mortgage deals have more or less doubled in the last 12 months according to current research.

During the last 12 months the five most competitive two year fixed deals' fees have increased from 998 to 1,500. Three year fixed deals' fees have also increased from 575 to over 1,100.

Last October the base rate was 5.75% and the average interest rate of the top five two-year fixed rate mortgages was 5.68%, but now it is 5.57%. Three-year fixed deals have seen a similar tiny reduction in interest rates with the average rate of the top four deals moving from 5.84% to 5.65% over the same period of time.

After all the panic that's occurred in recent weeks in the mortgage market lots of people may be tempted to grab the best deal they can and could wrongly focus on rates to exclusion of other considerations.

People really need to consider seriously the cost of these fees. It's too easy to just focus on the interest rate that's been charged but especially in a shorter term deal they will have a serious impact on the true cost of the mortgage.

There are still many good deals out there for people with substantial deposits or equity in their home and strong credit ratings. Unfortunately many people will not be eligible for them as lenders are increasingly taking a tougher line.

All brokers and intermediaries should reconsider their strategy in helping clients wishing to raise capital in the light of the recent credit crisis and changes to the Consumer Credit Act. The changes in the market and to the Consumer Credit Act mean that a secured loan could be a much better option for many clients.

These new changes changes to the act mean that all secured loans for residential purposes of any size come under the Consumer Credit Act and therefore every loan has to have a cooling off period, so the client is not pressured and an important factor is that early repayment charges are a maximum of two months interest depending when in the current month they notify the lender. When you add in that there are no upfront fees in the shape of application fees, booking fees and valuation and conveyancing costs then it's pretty easy to work out that on a direct comparison secured loans work out to be better value for clients.

So if you're tied in to your mortgage provider and wish to restructure some finance or raise money for a project then a better alternative to a re-mortgage could be a secured loan. Given the protection of the CCA and the lack of any upfront fees backed up by a simple one month's interest to redeem a secured loan, clearly they are significantly, cheaper, easier to arrange, more transparent, and possibly more accessible than a re-mortgage.
About the Author
The best Secured Loans in the UK market. Cheapest Loans by Far is the UK's Premier cheap Secured Loan provider. Need a mortgage? then go to Debt Consolidation Mortgages for the best mortgage deal available in the UK.
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