A remortgage is not always the answer!

As the mortgage market continues to frustrate borrowers and many have decided to put off planned moves and stay where they are, often looking to improve or extend their property.

A remortgage is not always the best way to deal with this; another option would be to take out a separate loan, using the equity in the property as security for the lender, and thereby benefiting from a favourable rate.

Secured loans are applied for by way of a simple application form and the lender will then adopt a similar (but often quicker) process to validate that you can afford the repayments and have adequate security in your property.

Some common reasons for choosing a secured loan as an option to remortgage might be:-

• Loans for home improvements or other lifestyle improvements.
• As a simpler and more cost effective replacement of having to remortgage when releasing home equity.
• Raising funds for debt consolidation to help spread out and reduce monthly loan repayments for better affordability.
• Small businesses looking for an additional cash injection to grow the business.

One of the primary reasons for choosing a secured loan as an option would be the costs involved in cancelling an existing mortgage early. Around 50% of borrowers in the past three years opted for fixed rate loans, most at excellent rates but with penalties during their initial period and therefore somewhat inflexible.

Other borrowers may have collected credit arrears which do not affect the mortgage they currently have but would certainly affect any future mortgage. Better then to keep the two separate and suffer a higher interest rate on the secured loan only.

In either case, it could be that the borrower wants to raise additional funds but does not want to pay interest on this for the whole mortgage period, preferring to clear the debt more quickly and thereby pay less interest overall.

A secured loan could be a better way!

So, secured loans have a place alongside mortgages as a quick and efficient way of raising capital secured on your property for whatever purpose you have in mind.

Secured loans are available from a huge range of loan brokers, many sold on the internet or over the telephone. One word of warning is that these are often sold with single premium insurance products and, whilst proper protection should always be considered, single premium products can be expensive and are not the only way to deal with this.

Bearing in mind the complicated circumstances that might give rise to the need for a loan it is always best to seek professional advice and an authorised mortgage broker would be able to consider both options for you.

Please note that this article is intended to provide information only and does not constitute advice. In order to assess what products are suitable for your own circumstances you should meet with a qualified mortgage broker.