Remortgages Verses Secured Loans

A refinance mortgage or remortgage can be used to refinance an existing mortgage or loan secured on property. Depending on how the homeowners current mortgage deal ranks with others in the market, often determines whether that homeowner wants to remortgage through their existing lender or otherwise. Remortgages pay off the original mortgage and are used as a means of releasing additional funds.

There is some general confusion surrounding Remortgages and it is relation to Secure Loans, as a part from being a type of secure loan, Remortgages can also be used to do or buy most things. One of the main differences between Remortgages and Secured Loans is that the former can be obtained for any sum of money you require, whereas the latter usually has a maximum restriction of around one hundred thousand pounds. Furthermore, secure loans do not change anything about the current obtained regulated mortgage.

Remortgaging is an important financial decision to a homeowner, so understanding the options available is vital. There are various options available for the UK Homeowner. For example, Fixed Rate Remortgages tie you into paying a set interest rate for a specified period of time and allows for effective budgeting with monthly repayments that remain stable throughout the fixed rate period.

A Tracker Remortgage is a variable mortgage whose rate is usually tied to The Bank of England base rate, whereas an Offset Remortgage is a deal that allows borrowers to offset the savings that they have against their outstanding mortgage debt. Whilst holding the savings in a separate savings account instead of earning interest on their savings, the borrower will pay a reduced rate of interest on their remortgage.

A Bad Credit Remortgage also known as an Adverse Credit Remortgage is available if you have adverse credit history or have been refused credit in the past. There are multiple other forms of remortgages too including Variable Rate Remortgages and Buy-to-Let Remortgages.

Therefore, it is always recommended to speak with an advisor when considering remortgaging of your home, as, with all these options available, finding the best one for you can be quite a daunting task.

With interest rates falling to their lowest over the past 19months, it is clear that the housing market is the biggest section of the economy to have been affected by the economic downturn.

The latest figures from the Council of Mortgage Lenders show that remortgaging fell to its lowest ever level as a proportion of new mortgages in August, with just 25,000 remortgage loans, down 13% on July and 19% lower than a year earlier. With the financial risk to the lender increased during the credit crunch, many bowed out of the housing market, happy to leave homeowners with their current mortgage deals. The situation only spiralled further as the government were forced to bail out the various banks left in severe financial trouble.

Although, according to reports made in October this year, the number of remortgages jumped a massive 35% in September, implying that lenders are slowly returning to the market. As a result of this, the remortgage market is now one of the most competitive, with banks and building societies reintroducing slashed interest rates. Remortgages have made a dramatic return and now account for more business than properties.

Among the advantages of remortgaging is how it can help with the consolidation of higher rate debts such as credit cards or car loans. Similar advantages include; remortgaging to take advantage of a lower interest rate, to release equity, to pay for remodelling or expansion of your existing home or to pay for large expenses such as the education or wedding of a child.

Arguably, there are some drawbacks to obtaining a remortgage in the current economic climate. For example, following the credit crunch, lenders have become increasingly stricter regarding who they lend to and how much they lend. This is a disadvantage to those who are newly self-employed as lenders will tend to regard their future income as uncertain and unreliable.

Similarly, if it has not been that long since you obtained your original mortgage and got it at a discounted rate you may face substantial penalties for early repayment. In order to qualify for a remortgage there are various steps to follow; your home must be valued, you must complete a detailed loan application, the lender will require conveyance work to secure a report and a solicitor will be engaged to ensure your previous lender is paid in full and to release any additional funds directly to you.

It is generally found that remortgaging your home costs much less than when you first obtained your mortgage, however this depends entirely upon the lender and your personal circumstance.