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Alternatives To Remortgages

Jun 1, 2008
Unlocking equity that has built up in a property can be achieved through a number of means including refinancing your home. Remortgages are carried out by home owners who want to release the equity in their home and apply for a new mortgage at the same time. They can either be carried out with the same lender that the borrower has their existing loan with, or with a different lender altogether.

All remortgages that release equity will result in the balance of the new mortgage being higher than the balance of the old loan. The old loan balance is paid off with the funds from the refinance product and the excess is given to the borrower and will represent the amount of equity that has been released.

While remortgages are extremely popular in the UK, there is an alternative method of equity release that will not require the home owner applying for a new mortgage and redeeming their existing one. Second mortgages are a popular and effective alternative. Second mortgages are also known as secured loans and are essentially loans that are secured against the equity in the borrower's home.

Instead of applying for a brand new home loan, the borrower will keep their existing product and secure a second mortgage against the releasable equity in their property. Secured loans must be issued by a different lender to the lender that issued the existing mortgage.

Both remortgages and second mortgages have advantages and disadvantages. Because second mortgages are similar to personal loans in that they are issued for a short term, they may be the most sensible option when the finance is required for a short period of time.

However, refinancing with a new mortgage can involve paying large application and brokerage fees. The longer the time period you stay with the home loan the more value you will receive out of paying for those fees.

Secured loans usually incur smaller fees than remortgages. There is no need, therefore, to keep the second mortgage active for a long period of time to gain some pay-back from any fees that may be incurred in securing the loan. Some second mortgages also offer facilities such as a cheque book and ATM card for draw downs, and a deposit book for making repayments.

Not all secured loans offer such options so it is advisable to shop around if you require them. Also keep in mind that extra fees may be incurred so ensure that you actually require the extra facilities before signing on the dotted line.

If you require any advice on refinancing your home you should contact an independent adviser for help. An independent broker can offer advice on the entire home loan market and can therefore help to find the most appropriate product for your personal situation. Independent broker keep up to date with the mortgage market and have software that can search all products that are available at any given time. This can help you to find the best product possible to refinance your home based on your personal financial situation.
About the Author
For expert advice on mortgages and Remortgages from an independent qualified Mortgage Broker contact UK Mortgage Source today
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