Should you remortgage or just take out a secured loan?
April 28, 2008
If you are a homeowner and you are looking to raise money against the equity in your home, there are a couple of routes that you may be able to take depending on your needs and circumstances. The two main choices that you will have are a remortgage or a secured loan, and it is important that you give each option careful consideration in order to ensure that you choose the right solution for your needs.
Some people may find that they benefit from remortgaging, as this can help them to reduce their mortgage repayments as well as raise some extra cash. Others may be quiet happy with their existing mortgage, and may therefore fare better with a secured loan in order to raise the money that they need.
Whilst the base rate has fallen three times in the past few months not all lenders have passed on the full rate cuts to their borrowers, and this means that you may be paying well over the odds compared to the same sort of mortgage from another provider that has passed on the rate cuts to borrowers. In circumstances such as these you may find that remortgaging is the best solution, as you can switch your mortgage to a more affordable product or provider, and you could also raise some cash from the equity in your home at the same time.
Whilst remortgaging to a cheaper deal could save you some money each month, there are a number of other things that you need to consider before you make your decision. First of all, the range of mortgages on offer is vastly reduced compared to this time last year, and this means that you may struggle to find a suitable remortgage. Also, lenders have really tightened up on their lending criteria, so you may find that whilst you were eligible for a particular mortgage a year ago you may now no longer be eligible. Finally the arrangement fees on mortgages and remortgages have rocketed over the past year, so you could find that it costs you a fortune to switch your mortgage.
Another way of raising money against your home is to opt for a secured loan, where instead of replacing your mortgage with another you simply take on a second mortgage, known as a secured loan. Your primary mortgage continues as normal, and you make additional payments to your new lender for the secured loan that you have taken out. Some lenders will allow you to borrow up to the full amount of the equity in your home, whereas others may only allow up to borrow up to a certain percentage of the equity in your home.
A secured loan is the ideal solution if you are happy with your existing primary mortgage or you do not want to go through the hassle and cost of remortgaging. You will find a range of lenders that can offer secured loans, and you can select from a choice of repayment terms to suit your needs and pocket.
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