Remortgaging Vs homeowner loans

Looking for a loan to buy a new car, build that dream conservatory or consolidate a number of smaller debts? If you're a homeowner the chances are that you are already weighing up the pros and cons of taking out a secured loan or remortgaging your property.

Mortgages are generally accepted as being the cheapest form of borrowing, but unfortunately there's more to remortgaging than low interest rates. First you'll need to establish whether you have enough equity in your property. Over the past year the housing market has cooled significantly and property prices have begun to fall. As a result many first time buyers will find that, despite regular mortgage payments, there's no equity to release.

Next you'll need to carefully work through the maths. Most mortgages have redemption penalties attached as well as exit fees. However, it doesn't stop there; you'll also have to add in the cost of arranging a new mortgage and the possibility of additional legal expenses. Overall costs vary enormously, but you should expect to pay something between £1000-3000. Such fees might make sense if you intend to borrow a sizeable amount, but if you are looking for a more modest sum it is worth looking at a secured home loan.

Interest rates on secured loans tend to be slightly higher, but the payback is that they are much more flexible. Repayment terms can be anything from three years upwards; whereas it's difficult to get a mortgage for less than ten years. The amount you can borrow is determined by the value of your property and your ability to meet regular repayments, but it can be as much as £250 000. Finally there's the time involved. Secured home loans are quick and relatively hassle-free to arrange; think two weeks rather than two months.

As with all financial decisions it's important to do as much homework as possible. Once you've decided which type of borrowing best suits your needs; then shop around. If you are still in any doubt consider talking to an Independent Financial Advisor.

Remember that your property is at risk of repossession if you are unable to meet loan or mortgage repayments.