Remortgaging is a popular option for homeowners looking to secure additional funds against the value of their home. Nevertheless, there are instances where a secured loan could prove more accessible, effective and affordable than a comparable remortgage product. Particularly when considering the various types of specialist secured loans available, such as bridging finance. In order to determine which of the two is most appropriate in any given scenario, it’s first worth considering how each of the two works:
What is a Secured Loan?
As the name suggests, the term ‘secured loan’ applies to any type of loan secured against assets owned by the applicant. In most instances, loans are secured against the applicant’s home, though it may also be possible to use other valuable assets as collateral. In the specialist secured loans arena, lenders are often happy to accept residential and commercial properties, land, automobiles, jewellery, fine art and other personal possessions to cover the cost of the loan. A secured loan can typically be taken out for absolutely any amount with no upper-limit, in accordance with the agreed value of the collateral provided. In addition, there are no restrictions as to how a secured loan can be used, allowing borrowers to allocate the funds for all personal or professional application they choose.
What is a Remortgage?
Though technically a secured loan in its own right, remortgage products are somewhat more restrictive than secured loans. In most instances, a remortgage is taken out as something of an extension on an existing mortgage with the borrower’s current provider. Their home is therefore the only acceptable collateral for the loan, which may limit how much they can borrow. In addition, the remaining balance owed on the mortgage and the borrower’s history of timely payments (or otherwise) may affect their eligibility. In addition, remortgage products are usually only available for very specific applications. Examples of which include improving or extending the property itself – restrictions varying from one lender to the next. As is the case when applying for a mortgage in general, securing funds by way of a remortgage can be a time-consuming and complex endeavour.
When Is a Secured Loan the Preferred Option?
By considering the points outlined above, it becomes clear that there are certain instances where a secured loan could be preferable to a remortgage. If the funds are needed as quickly as possible, a secured funding solution like a bridging loan could be ideal. If you intend to use the funds for a non-standard purpose, a secured loan may be the only option. The same also applies if you have an imperfect credit rating or proof of income, which could count you out of the running for a remortgage (iConquer). This isn’t to say remortgage products aren’t without their advantages and shouldn’t be considered. Instead, it’s simply a case of ensuring you explore every available option, prior to submitting your application.
Seek assistance from an independent broker or financial adviser, if unsure which secured funding solution best-suits your needs.