While mortgage debt is secured and has positive connotations for the economy, there’s no doubt that it’s grown incrementally over the course of the last few years.
According to the October Money Statistics from 2017, the average outstanding mortgage in the UK peaked at £121,678. This represents a significant increase on the 2013 figure of £109, 487, while it also marked the first time that the number had risen beyond the £120,000 level.
Some of this debt will be tied to remortgaged properties, of course, as home-owners look to leverage the equity in the real estate to secure additional cash. Owners in search for money can also take out a secured loan against the property, however, which uses the house as collateral and enables you to remain with the same mortgage lender.
But what’s the difference between these two options, and which one is best for you? Let’s take a look:
The Benefits of Remortgaging
Whenever you take out a secured loan against the value of your home, lenders apply a legal charge to the property in order to protect their cash. This charge is secondary to the one applied by the mortgage lender, however, meaning that secured loans typically carry higher interest rates as they represent an increased risk.
The key takeaway here is that remortgaging is often a cheaper option for home-owners, particularly when you consider that lenders may also incentivise borrowers with a free valuation or an exemption from any legal fees.
Additionally, this option is arguably easier to manage from the perspective of borrowers, as they only have to deal with one lender and a single, monthly repayment.
When a Secured Loan is a Superior Option
Given that taking out a secured loan will often be more expensive than remortgaging, it’s worth appraising if there are any instances in which the former option would represent a better choice.
If you’re on a particularly competitive, fixed-rate mortgage with a lender, for example, you may be loath to given up the benefits of this product. Taking out a secured loan from lenders such as Ocean Finance can help you to retain these rates, while also accessing the funds that you require from a third party.
Your mortgage lender may also apply hefty charges for the early repayment of your debt, and in this case it may be undesirable to switch. This also supports the case for taking out a secured loan, although once again the decision needs to be taken in line with your own, unique circumstances.
Those who have recently switched from full-time work to the world of self-employment may also find the option of a secure loan more palatable, as any decline in your earnings or credit score will impact negatively on any remortgaging deal that you access.