Secured Loan Or Remortgage Finance?

When you’re looking to raise a high amount of finance, and you own your home, you have a couple of options open to you. The most popular choices to access the cash you have in your home (equity) is either to remortgage your home or put a second charge on the property by using a secured loan for whatever amount you need. So should you get a secured loan or remortgage your property instead?

Both options are secured against your property, and both require you to have equity in your home. Which is best and “why then” becomes the question you need to answer.

The information to follow will explain the processes involved in each method of borrowing with some hypothetical scenarios for each borrowing option. The hope is that it should help you decide what the best method is for you to raise the finance you need on the most favourable terms to you.

Use the form below to access a very broad specialist lender panel with 100’s of secured loan and remortgage products with high rates of acceptance!

Which is Best, the Secured Loan Vs Remortgage?

While you don’t get the lower introductory rate for the first two years using the secured loan option, you do get a lower rate than the standard variable that Yorkshire Building Society would charge after the two-year introductory rate expires.

To determine the best option (secured loan or remortgage?) for the amount you need to borrow, you will need to know how much your property is valued at and the amount you’ve already paid towards your existing mortgage. What you’ve paid is the amount of equity you hold in the property. The higher your home equity, the better a rate you’ll be able to secure.

How Halifax Secured Loans Fair

Halifax is a leading specialist for UK secured loans, second second-charge mortgage products, and offers a variety of remortgage options, so it’s no surprise many are looking to find out first if they can borrow and secondly, how much.

To answer the first question, Halifax will only lend to existing customers. Therefore, if you’re not currently a customer, you won’t be eligible for any of their borrowing options. To meet this requirement, you would need to open an account and then consider borrowing.

It’s worth considering that when you ask the bank you hold your current account with to lend to you, they hold the most data about you. They know how often you’re dipping into your overdraft and why, such as overdrawing on a Saturday night.

With regards to how much you can borrow, it would depend on, firstly, having a mortgage. For homes that are mortgage-free, remortgaging won’t be possible as Halifax do not allow capital-raising on a mortgage-free property. Mortgage-free property owners would need to look at the Halifax secured loans.

Secondly, you need to consider why you’re applying for the loan, as they may ask during the application process what you plan to use the loan for. For home improvement loans (covered further down this page), they may want to know you’ve planned your budget carefully before approval.

Is It Better To Remortgage Or Get A Loan? The Cheapest Secured Loans And Remortgages In The UK, Compared By Our Trusted Experts, Enquire Now.

Interested In Remortgaging or Secured Finance?

To get a rough idea of what they may expect, they have published their own advice for managing home improvement projects’ finances.

Existing Halifax customers with a mortgage that has been in place for at least 6 months can apply for a minimum £10,000 borrowing.

The total amount you can borrow can be up to 85% of your property value or 75% in the case of interest-only mortgage customers, except for a customer having any defaults on the repayments.

In the case of late payments, they will not approve further borrowing. This is the case with most mainstream lenders, so if you find yourself in this situation, you will need to consider bad credit finance options for mortgage holders and homeowners.

To find out more about Halifax borrowing, they do have a website for brokers at: https://www.halifax-intermediaries.co.uk/.

There is a variety of information on that site, including their lending criteria. The website does state that it’s “for the use of mortgage intermediaries and other professionals only”. This means that the offers are available to mortgage brokers and may not be available directly to customers. That’s not always the case, though. You can use the site for research purposes but not for financial advice.

The message is essentially there to protect Halifax from claims of borrowers using the information to make financial decisions. They do not offer advice, and the content is for professionals who understand the terms and lingo used. There’s a risk that the general public could misinterpret the information, which is why the bank states that it’s to be used by professionals only.

That’s all. You’ll find similar websites for all banks that make financial products available through mortgage brokers just by searching online for the bank name + intermediary. Just don’t use them for financial advice, as those websites are not the purpose.

How to Compare Secured Loans

A secured loan can be secured against any asset. When you’re using your home as security on the loan amount, most comparison websites will refer to this type of loan as a homeowner loan rather than a secured loan.

The reason is, if you want to raise finance to buy a car, you could use the vehicle as security rather than the home. A homeowner loan will be of higher value in most cases because it’s based on the valuation price of your home and the equity you have.

There are a few large comparison websites that can be used for an indication of what’s available. A few you may already know:

• ComparetheMarket.com
• GoCompare.com
• uSwitch.com

These sites cannot give you exact figures, though, because they base the best-secured loans on the indicated APRC (Annual Percentage Rate of Charge). They won’t consider the potential charges you can incur in the process.

There are charges involved in taking out a secured loan, just as for remortgage products.

• Legal Fees
• Administration charges or Arrangement fees
• Valuation fees
• Broker Fees, if applicable

The above just name a few. Other charges can be involved depending on your personal circumstances.

Our best advice when you want to compare secured loans is:

• Research the APRC of each deal
• Review the terms and conditions of each deal
• Compare all the fees involved in the process

You will likely find that the best headline deal to be shown isn’t the best deal when the terms, conditions and fees are factored into the cost. Based on this, you then need to find out if you’d be suitable for the loan based on the lender’s criteria.

For this stage, approach the lender and ask them if they can do a quotation search to prevent it from being recorded on your credit files, which will lower your credit rating, especially if you compare two or more financial products.

Further advice on credit information is available here.

Should You Remortgage to Pay for Home Improvements?

Remortgaging is a popular option for raising finance for a few popular purposes, including:

• Debt consolidation
• Getting a better deal
• Releasing equity for home improvements

The first thing to consider is if you need to use this option. It’s not always the best way to finance a home improvement project. If it’s a small project, perhaps £2,000 or £3,000, it may work out cheaper using 0% finance deals on credit card purchases if your credit rating permits that option. With bad credit, that’s usually not an option.

Unsecured loans can be another avenue worth exploring as you won’t be using your home as capital for security. Recently, some banks have been increasing the amounts customers can borrow as an unsecured loan, making finance more accessible for tenants. Unsecured loan amounts can go as high as £50,000 with some lenders, depending on your credit history.

In terms of the repayment options, the maximum duration is seven years to repay an unsecured loan. Secured loans can be repaid over longer terms, such as 10 or 25 years, lowering your monthly premiums. Remember that a lower monthly payment does not always reflect a lower interest amount. Because you’re repaying for longer, the total interest repayable on the loan amount can work out more expensive.

For larger home improvement projects, such as installing a conservatory, an extension or loft conversion, though, that’s when you should consider the remortgaging option or taking out a secured loan. For larger investments, you’re best not to get a baseline figure and then approach lenders. Research and thorough planning should be done before applying for finance.

What sort of planning should you do?

Get a quote for how much your project will likely cost and the length of time it’s likely to take. Ask a local contractor or use an online quotation search service.

Some options include:

• MyBuilder.com
• RatedPeople.com
• CheckaTrade.com
• TrustMark.org.uk
• TrustedTraders.which.co.uk

Whatever project you’re planning on, you need to know what a contractor is likely to charge for both labour and the cost of materials. Some lenders may ask for details on how you’ve budgeted for the project. Without quotes for the work to be done, you could be refused.

Remember that you may need to factor in planning permission and building regulation inspections. Also, if you’re using an estimate rather than a quote, add a cushion in case the project goes over budget.

This could be adding an additional 25% to the amount you think you need to ensure that you’ve enough finance in place in case the project goes over budget. Lenders will like that you have a cushion in your budget projections, as many projects can easily drift out of control.

The other thing to consider prior to agreeing to any work being done is having a quote from the contractor, not an estimate. Estimates are only that. A guess at how much it will cost. A written quotation is more acceptable.

Finding the Best Secured Loans for Home Improvement Projects

Should you decide that the remortgage option isn’t the best way to finance a home improvement project, the next thing to consider is a secured loan. The same research would involve researching your remortgage options because you need a thorough budget to ensure you raise enough finance to cover the project’s cost through to completion.

Not all lenders will ask to review your budget, but you’re best to know your figures before borrowing large amounts anyway. The last thing you want is to take on a large project and run out of funds, leaving you unable to see it through to completion. That could be a disaster.

When you know your budget, then use the advice outlined earlier about “How to Compare Secured Loans”.

In a nutshell, you don’t want to go with the best APRC, but instead narrow it by selecting a good APRC along with favourable admin charges, legal fees, any valuation fees, arrangement fees and any additional charges the lender applies to the loan.

Does a secured loan affect remortgaging?

Yes. In the case of homeowner loans, a secured loan is a second charge on your mortgage. Therefore, any defaults would first see your mortgage lender paid from the proceeds of repossession and the second charge lender-paid from what’s remaining.

When you raise finance with a secured loan for homeowners, you’re effectively placing a second-charge loan on it; therefore, it will lower your equity. That will take a ripple effect by lowering your loan-to-value ratio, decreasing the total amount you can borrow against your home.

With enough equity in your home, and the ability to pass the affordability criteria, you’d be able to remortgage for a higher amount and use the excess to repay a secured loan.

If you already have a secured loan and don’t have enough income to increase the amount of your remortgage, you may need to keep your mortgage and secured loan separate, so essentially remortgage to pay off your debts may not be an option.

It is certainly possible to remortgage whilst you have an outstanding secured loan. Still, it does need to be considered in the application process because it affects the total amount you can borrow as it is placing a second charge loan against your home.

What’s better for Bad Credit Applicants – A Secured Loan or a Remortgage?

So is it better to remortgage or get a loan? In situations where your credit reports hinder your ability to access finance, the secured loan option is the easiest way forward.

That’s not to say it’s the best option, just easier. The reason is it’s a higher risk anyway because it’s a second charge on your property, but more importantly, the lending criteria for secured loans are not as strict as they are for mortgage products of any type.

For that reason, it’s often easier to raise finance through a secured loan. Sometimes with the funds released on the same day, but if you need this, expect the lender to have a higher arrangement fee. In most cases for a secured loan, when you’re using your home, expect it to take a few weeks, in particular when a valuation report is required by the lender.

There may also be instances, for example, if you’re self-employed and used the old Self Certification method to obtain your mortgage. If that were the case, it might prove difficult to remortgage your home with your real figures rather than what you used for your initial mortgage under the old self-certification scheme.

Since that’s been abolished, remortgaging could be difficult with certain lenders. Working with a mortgage broker with knowledge of lenders specialising in the UK self-employed mortgage sector would be beneficial.

The other thing you need to consider is if your mortgage term is due to expire. If you exit early, you’ll likely face early repayment penalties.

In that case, secured borrowing can let you access finance without incurring a heavy financial penalty for switching lenders before your mortgage term expires. If your mortgage has run its course and is now essentially floating on a variable rate or a tracker, and you can get a good deal on a remortgage, it may work out financially in your favour in the long term.

Secured loans are faster to access, but ultimately when you use your home as security, you’re placing a second charge on your home. Not a first charge. Therefore, it’s riskier for a lender. So too, is bad credit, though.

Interested In A Remortgage or A Secured Loan?

Both scenarios will often have a higher interest rate attached to the loan amount, making your most important decision being which company to apply to for finance.

When you have impaired credit, it is advisable to use a mortgage broker with expertise in the subprime market to stand the best chance of approval. They’ll be able to advise (provided they’re CeMap certified) on what lender best suits your personal situation.

If you opt to go it alone, the information above should point you in the right direction for researching the two options (secured loan or remortgaging) to raise the finances you want for whatever you need.

Secured Loan Calculator vs a Remortgage Calculator

To quickly check market rates, we run hypothetical figures through the remortgage calculator for CompareTheMarket.com and the same figures again through the Secured Loan (Homeowner calculator) using the same comparison website.

The results…

A property valued at £170,000, remortgaging over 10 years with a loan-to-value ratio of 30% to release £50,000. The best rate on offer was from Yorkshire Building Society at a fixed rate of 0.89% for the first two years, then reverting to a standard variable rate for the remaining 8 years – currently 4.74%.

For the same amount over the same repayment time of 10 years for a secured loan, Paragon Exclusive is the best deal, offering 3.9% for the 10-year duration.

Remortgage-Related Pages To Discover:

• Bad credit remortgages
• Best current remortgage deals
• Remortgage your home to buy a car
• Remortgage with a CCJ
• Remortgaging while on a Debt Management Plan (DMP)
• Remortgages for consolidating debt
• Costs associated with remortgaging a property

A breakdown of the 2024 homeowner loans market

The cost of living crisis in August 2024 has changed the approach to homeowner loans for poor credit for many lenders. Affordability calculations have changed to take into consideration higher gas, electric and food bills.

Remortgage Or Secured Loan

You could consider a remortgage or secured loan so you can raise the cash to buy abandoned buildings for sale in Manchester, as abandoned property is often challenging to mortgage by itself.

Navigating the Financial Landscape: Equity Release, Secured Loans, and RIO Mortgages

The financial ecosystem is vast and continually evolving. Among the plethora of financial products available in the UK, three stand out for homeowners and those approaching retirement: equity release, secured loans, and Retirement Interest Only (RIO) mortgages. Each has its distinct advantages and potential pitfalls. This guide will delve deep into these options, shedding light on their ins and outs.

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Equity Release: Unlocking Your Home’s Value

Equity release schemes allow homeowners to tap into the wealth tied up in their property without moving. They’ve become an increasingly popular solution for those who want to supplement their retirement income or meet specific financial needs.

Types of Equity Release

1. Lifetime Mortgages: These are the most common type of equity release. Here, homeowners borrow money against the value of their home, and the amount is repaid, along with the accrued interest, when the house is sold. No need to make monthly repayments, but compound interest can build up over time.
2. Home Reversion Plans: This involves selling a part or all of your home to a provider in return for a lump sum or regular payments. While you can continue to live in the house rent-free, the portion you sold will belong to the company.

Pros:

• Immediate access to funds.
• No monthly repayments (especially with lifetime mortgages).
• A no-negative equity guarantee ensures you won’t owe more than your home’s value.

Cons:

• Can reduce the inheritance you leave behind.
• Interest accumulates, leading to a potentially significant debt.
• Releasing equity may affect your tax position and entitlement to welfare benefits.

Note: If you’re wondering about the age restrictions, especially the question, “can I get a 30-year mortgage at age 55”, the link here provides comprehensive insights on that.

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Secured Loans: Borrowing with Backup

Secured loans, also known as homeowner loans, are borrowed amounts that are secured against an asset, usually your home. They are typically used when you need to borrow a large sum of money and are often a second-charge mortgage.

Why Choose a Secured Loan?

• Higher Borrowing Amounts: Secured loans often allow for larger borrowing amounts than unsecured loans.
• Lower Interest Rates: The risk to the lender is reduced because the loan is secured against your property, potentially leading to lower interest rates.
• Flexible Repayment Terms: With longer repayment durations available, monthly instalments can be smaller and more manageable.

However, it’s essential to be aware of the risks. If you fail to meet the repayments, the lender has a right to repossess your home. For detailed insights on the offerings from one of the leading providers, explore the United Trust Bank secured loan offerings via this link.

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Retirement Interest Only (RIO) Mortgages

RIO mortgages are relatively new in the financial arena. They’re designed for older borrowers, often those who are retired, allowing them to pay only the interest on their loan monthly, with the capital repaid when the property is sold.

Features:

• No Set End Date: Unlike standard mortgages, RIO mortgages don’t have a fixed term.
• Affordability Checks: Lenders assess if you can meet the monthly interest repayments, considering your pension, savings, and other income sources.
• Flexible Repayment: Some RIO mortgages may offer the flexibility to make ad-hoc capital repayments.

Before committing, it’s crucial to get a clear picture. If you’re exploring options like mortgage for over 70s, you might find this link helpful. Additionally, if you’re searching for cheap remortgage deals in 2024, this link offers a comprehensive overview.

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Fixed Rate Homeowner Loan: Predictability in Repayments

Fixed-rate loans uk, particularly homeowner loans, offer the advantage of predictable monthly payments. Your interest rate remains the same for a specified period, meaning your monthly repayments are consistent, irrespective of market fluctuations. To explore this topic more, you can visit this link.

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