There Are Times For A Remortgage And Other Times For Secured Loans Otherwise Homeowner Loans
When a homeowner needs to raise funds for almost any purpose he can take out either a remortgage or a secured loan.
Secured homeowner loans as well as remortgages are secured products requiring to be secured on property.
Normally secured loans are secured on owner occupied property but some lenders advance these home loans on buy to let properties which have a sitting tenant.
Homeowner loans and remortgages have much in common, but the main difference between them is that a remortgage is a first charge and recorded at the Land Registry as such while a homeowner or secured loan is a second charge recorded on the Land Registry behind the mortgage already secured on the property.
Before the credit cruch homeowner secured loans were common and their rates commenced then at less than 6%.9%.
Since the start of 2007 secured loans have fallen to less than 20% of their level at that time and it is difficult to fully understand the reason for this because although interest rates have certainly risen, these home loans are still available from about 9% making them even now a cheap way for homeowners to borrow.
Secured loans are secured against equity which is the sum left when the mortgage balance is deducted from the value of the property.
Before the recession, loan to values went up to 125% making it possible for a homeowner to borrow up to 25% more than the house was worth, but this has all changed and the maximum LTV for employed applicants is 80% and 70% for the self employed.
The loan to values granted for remortgages is slacker than for secured loans and some remortgage lenders advance remortgages at 90% LTV and if this is the equity needed remortgages would be preferablw to secured loans.
If the priority is a low interest rate remortgages would be better as their rates are the lowest ever at present.The APR of 1.84% is only available at up to 60% LTV.
Sometimes however a secured loan is the better choice, and the main time is when a homowner is tied in with his current mortgage provider and would be required to pay an early selltlement penalty if repaying sooner than agreed.
The minimum penalty is 2% of the outstanding balance but can even be as much as 5%. which on a reasonably small mortgage of £100,000 would be £2,000 or £5,000.
Therefore which home loan product one chooses depends mainly on the personal circumstances of the individual concerned but both are equally good methods for a homeowner to obtain funds for a multitude of purposes.
