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Remortgage Or Take Out A Secured Loan Which Is Better?
With rising interest rates and the high costs of energy and fuel, many homeowners in the UK are faced with the prospect of having to borrow money to help them over some financial difficulties in their lives. They do have two choices in borrowing taking out a secured loan or remortgaging their home. If they have any amount of equity built up in the home they can take out a secured home equity loan. In many cases a remortgage is a cheaper option when it comes to borrowing when you have collateral for the loan.
It is quite common to use your home as collateral for a loan, whether you take out a separate loan or remortgage your previous loan. You do have to look into all your options, such as the cost of the penalties involved in remortgaging your home. If your mortgage is locked in for a number of years and you are only part way through this term, you may have to pay a fee in order to break the agreement. Some fixed mortgages have penalties as high as 7% if you pay off the mortgage within the term. You may be able to have these penalties waived if you use the same lender that currently holds your mortgage, but you may not be able to if you choose a different one. In this case, it may be better for you to take out a secured loan with the new lender to help you save money.
You have to look at the interest rate charged on the loan when you want to decide between a secured loan and a remortgage loan. With both a secured loan and a remortgage, you will save on the interest rates as compared to those charged on unsecured loans. Compare the interest rates offered by the various lenders along with the costs associated with getting a secured loan. In the case of a remortgage with the same lender, it is unlikely you will need to go to the expense of having another appraisal done on your home. If you put your home up as collateral for a secured or home equity loan, then the lender will need an appraisal to ensure you do enough equity built up for the amount of money you want to borrow.
There are many fees associated with remortgaging your home, such as:
1. Valuation fees
2. Administrative costs associated with handling the loan
3. Arrangement fees by the lender
4. Legal fees
If you use a broker in obtaining the remortgage, there may be broker fees associated with the loan as well. You do not have any of these fees with a secured loan with the exception of lender arrangement fees.
The best way to determine whether you should take out a secured loan or remortgage your existing mortgage is to carefully consider all the costs involved, how much your new monthly payment will be and how much longer it will take you to pay off your mortgage. When you do this you will be better able to make a financial decision based on your individual circumstances.
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