When A Secured Loan Is Better Than A Remortgage
At times when a homeoner makes up his mind that he needs some more cash
, he has to choose 5he best way for him.
Most homowners have certainly heard about a remortgage and a secured loan but they still do not know what they both are in detail., but they are still unclear as to what exactly these two forms of loans are, or which would be the better fom them
The first thing to clarify is that remortgages and secured loans are both only available to homeowners, as they are both homeowner loans that require to be secured on the equity of a property, and as such the greater the equity, the larger is the available secured loan or remortgage.
Equity is what remains when the mortgage balance is deducted from the value of the property. An example of this is that if a property is valued at 280,000 and the mortgage outstanding is 150,000, the equity in this instance is 130,000.
This does not mean, that based on the above example, a remortgage of 280,000 or more would be available or a secured loan of up to 130,000 or more, as lenders allow a margin of safety in case they unfortunately ever have to repossess the property to make certain that they get their money back
Unlike up to about three years ago, neither secured loans or remortgages of up to 100% LTV and as high as 125% with some lenders, are available.
The self employed can obtain a secured loan of up to 75% loan to value, and for the emoloyed the LTV is 85%.
Remortgages on the other hand are available at up to 90% with some mortgage lenders, and so on occasions when equity is tight, a remortgage might be preferable to a secured loan.
The rates for a tracker remortgage and also a mortgage are from less than 2% with some providers.
The lowest rate for the other homowner loan starts from about 9%.
Often these days, with the complete abolition of self cert remortgages, a secured loan would be the better choice for a self employed applicant who cannot produce accounts, as resticted proof of net profit is still accepted by some secured loan lenders.
However, when income proof is limited, the rates are high and good equity is required.
Another time when a secured loan should be the home loan of choice, is when the borrower is tied in with his existing mortgage deal, and would incur a penalty if the mortgage was repaid early.
A remortgage and a secured loan have one main difference in that remortgages pay off the current mortgage and can be for the same amount as the existing mortgage or can be for a larger amount to release funds that can be used for weddings, holidays, car purchase,to buy a second or holiday home or even for debt consolidation.
Secured loans can be used for all the same reasons as a remortgage, but are a loan that stands alone and does not replace the mortgage that already exists.
While this is only a brief descritioin about remortgages and secured loans, it is to be hoped that it has been useful.
by: Liz Moir
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