Borrowing & credit · 7 min read
Secured loan or remortgage? What to compare before raising money from your home
Homeowners who want to raise money can sometimes face a choice between replacing the existing mortgage and adding separate borrowing secured against the property. The useful comparison starts with the current mortgage and the purpose of the new money rather than the lowest-looking monthly payment.
Understand what changes in each route
A remortgage normally replaces the existing first-charge mortgage with a new mortgage. A second-charge secured loan normally leaves the first mortgage in place and adds another loan secured against the property. That structural difference affects which balance is repriced, which fees may apply and how the borrowing is managed.
Protect the value of a good existing deal
If the current mortgage has a competitive rate or an early-repayment charge, replacing the whole balance can create a cost that is easy to miss when focusing only on the extra money required. Record the current balance, rate, deal end date and any early-repayment charge before comparing alternatives.
Compare total repayment as well as monthly cost
A longer term can reduce the monthly payment while increasing the total amount repaid. Compare the amount borrowed, rate, fees, term and total repayment over a sensible comparison period. Do not treat a lower monthly figure on its own as proof that one route is cheaper.
Remember that both routes can put the home at risk
Borrowing secured against a home changes the consequences of missed repayments. If the new money is being used to consolidate unsecured debt, the security risk deserves particular attention because debt that was previously unsecured may become backed by the property.
Match the structure to the actual objective
Home improvements, debt consolidation, a business purpose and a temporary cash requirement are different jobs. The amount, expected repayment period, future plans for the property and wider affordability should all be clear before an appropriately authorised professional assesses suitability.
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