When homeowners need to borrow money for all kinds of purposes, many realize that there are two options open to them which are sercured loans and remortgages.
However many of these people are uncertain about the differences between these two loans, their interest rates, how much they can borrow, what the best product would be and the most suitiable way to make an application.
The first step is to explain what exactly is meant by a secured loan and remortgage.
Both of these are homeowner loans, and naturally are only available for those who own their own property, as they require a concrete form of collateral which in this case is their property.
In general the asset used as security is the homeowner's residential address, but some lenders grant secured loans and remortgages on second properties, holiday homes and buy to lets, although normally the loan to value will be reduced in these instances.
The most important difference between a secured loan and remortgage is that a remortgage replaces the mortgage currently secured on the property and it can be for the same sum as the existing mortgage, and is being used simply to obtain a better mortgage deal with a lower interest.
Sometimes a homeowner wants to borrow extra cash for many diverse reasons.
On the other hand, secured loans never replace a mortgage, but are a completely separate entity that ranks after the mortgage. A property cannot be mortgage free when applying for a secured loan, as they are secound charges.
Secured loans have the identical purposes as remortgages, apart from the fact that as we have already stated they never pay off mortgages. Just as remortgages, secured loans double very well as debt consolidation loans.
Interest rates for remortgages are generally less than that of secured loans with the latter costing from 7.9% APR, providing the homeowner has at least 60% equity in his property, and the former starts with interest rates of less than 2% if there is at least 70% loan to value.
There are times when a secured loan may well be preferable to a remortgage, and the main one is if the homeowner is tied in to his current mortgage deal, and would incur a heavy penalty if his mortgage was paid off earlier than it should.
Early settlement penalties range from 2% to as much as 5% of the balance which means on a £200,000 mortgage, the settlement penalty would be from £4,000 to £10,000, making a secured loan the better choice.
In cases where the tie in mortgage period is over, a remortgage may prove to be the better choice.
Author Resource:
When you want a remortgage, mortgage, secured loan or are seeking debt advice look no further than Champion Finance. They have been arranging secured loans since 1985 and also provide whole of the market mortgages and remortgages. Helpful friendly debt solutions of all kinds are available including debt consolidation., debt management , etc.
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