There is much to be discussed about remortgages and secured loans and finding the best financial solution for your kind of situation. If you plan on understanding remortgages and secured loans better, then you’ve come to the right place. For quite some time, a lot of people considered remortgages as a cheap method of raising money. One of the reasons why most people thought so is that interest rates that you can acquire on a mortgage are lower than those you acquire from an unsecured loan. In the present, though, if you want to raise money, financial experts advise against remortgaging because of the increased regulation and Financial Services authority that have come about in current years. For these financial experts, there are more instances when a secure loan will be a wiser and better financial option than a remortgage.
One such example is when a mortgage borrower will be dealing with a significant redemption penalty on their current mortgage. Borrowers acquire penalties when they express to switch lenders or decide to only pay off their mortgage at a period when rates are cheap. It is important to remember that each lender also has varying terms and conditions. Your penalties can go as high as 7% of your outstanding mortgage balance from you fixed rate mortgage if you get them during the period of fixed rate.
For you to know which is the most financially sound decision between secured loans and remortgages, you have to consider the overall loan cost. A handy tool that you can use to compare between the two choices will be the APR that will also take into account associated charges and fees. When it comes to processing remortgages, a lot of fees are involved in the process such as broker fees, lender fees, administration and valuation fees, and even legal fees. Meanwhile, secured loans only have a few additional fees, which are often subjected to the lender’s arrangement fee and a broker’s fee.
Based on financial expert advice, you can find out which financial solution benefits you the most when you compare secured loans with the total remortgage process costs. This step is very important for borrowers who have a poor credit history. Most of the time, you will be paying an interest rate that is significantly higher for your entire mortgage when you decide to raise extra money through a remortgage after you have taken out your mortgage before getting into any credit troubles. Meanwhile, getting a secure loan means benefitting from a prime interest rate on your mortgage. At the same time, for your new loan, you will only be charged a non-conforming rate.
When you decide between the two financial options, you also need to look into the speed by which the additional funds will be given to your account. Generally, you can get funds from secured loans much faster than a remortgage.
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