Do you Have to Pay Off your Secured Loan if you Want to Remortgage?

More and more British consumers are remortgaging in a bid to save money on their mortgage repayments, and some find that they can save over £1,000 a year. Switching mortgage lender is not a complicated process and can be quite cheap. And if you are not moving home, you do not even have to pay off your secured loan if you want to remortgage.

There are many good reasons to remortgage, not least because it can save you a significant amount of money. It is also an excellent option if you wish to release some of the equity that you have built up in your home.

Getting a remortgage will be a much simpler process than getting your original mortgage was. Your home will be worth more, you are probably in a better financial position and you will have proven that you can keep up with repayments.

However, if you have a secured loan on your existing mortgage the situation becomes a little more complex. You may ask yourself if you have to pay off your secured loan if you want to remortgage? The good news is that if you are not moving home you do not have to pay off your secured loan. You can use your new mortgage to pay off the old one and keep your secured loan. However, the fact that you have a loan secured against your home's value will have an effect on how much you can apply for when you remortgage. And since remortgage interest rates are lower than secured loan rates, it probably makes better financial sense to use your remortgage to pay off your existing mortgage and your secured loan. The main drawback with this is that you may be liable to pay redemption penalties for paying off your mortgage and secured loan early. On top of exit fees, legal fees and other costs associated with remortgaging, this can make it quite expensive at the outset. However, you will probably recoup these expenses and save money in the long term.

When shopping around for a remortgage you should ask the same questions as you would when shopping for any form of credit. These should include:

• How much in the annual percentage rate (APR)
• Are there any set up fees
• Can I make early repayments and take repayment holidays
• What are the hidden fees and charges

You might like to read other Money Beacon articles, such as Pros and Cons of Remortgaging versus Getting a Secured Loan, to help you understand your options.