Pros and Cons of Remortgaging versus Getting a Secured Loan

If you are a homeowner you have two main choices if you wish to release extra capital from your home, a remortgage or a secured loan. In this article we look at the pros and cons of remortgaging versus getting a secured loan.

Secured loans and remortgages share two very important features in that they both offer credit at low interest rates and they both require you to be a homeowner to avail of them.

The reasons why people avail of secured loans and remortgages are also similar. The main reasons are to raise capital for expensive projects such as home improvements or renovations or to consolidate their debts. However, there are some fundamental differences between secured loans and remortgages and each has its own advantages and disadvantages.

With a secured loan you may have the option to borrow more as many lenders allow you to borrow up to 125 per cent of your home's value, less anything owed on your current mortgage.

Remortgages will generally limit you to borrowing up to 100 per cent of your home's current value.

With a secured loan you do have the disadvantage of having to make two repayments each month, often to two different lenders. Remortgages offer more convenience in this regard as you only have to make one repayment each month.

Remortgage rates can be cheaper than secured loan rates. In fact you could save significantly by remortgaging as you could find a better deal than your existing mortgage, saving you money on two fronts. However, the chief disadvantage of remortgaging is the expense involved. While you could get a secured loan for little expense, remortgaging can be an expensive process. If you are currently locked into a fixed rate mortgage you could could face expensive redemption fees if you switch lender. In addition, exit fees from your current mortgage could be high. Add to this extra costs such as legal fees and revaluation fees and it could be, initially at least, an expensive option.

If you really want to weigh up the two options properly you will need to do some research. Compare a number of secured loans and remortgages and pick what you think are the three best deals from each option. Calculate what each will cost you over the full term of the loan, and include any fees and charges. From this you should be able to ascertain which is the best deal for you. The pros and cons of remortgaging versus getting a secured loan will depend very much on your own personal circumstances so be sure to review your situation in detail before deciding.