Differnces And Similarities Of A Remortgages And Homeowner Loans

Only those who are property owners can apply for a secured loan or a remortgage, which is the most important thing that they have in common. They are secured on the equity on a property and that property must already have a mortgage secured on it.

There must already be a mortgage secured on the property, as another name for a secured loan is a second mortgage that ranks behind the first mortgage that was taken out to buy the property initially.

Homeowner loans, which are another name for a second mortgage, are registered at the Land Registry along with the original or first mortgage used to purchase the property.

A remortgage is a mortgage that is taken out to replace the mortgage that is already secured on the property , and remortgages must be taken out with a different provider.

When a mortgage is agreed originally, there is normally a tie on period which can stay in place from one year to normally a maximum of five years, although tie in periods of ten years are not unknown.

During the tie in period, an early repayment penalty would have to be paid if paying the mortgage off early, and this is between 2% to 5% of the outstanding balance which can be a considerable sum, as even on a relatively small mortgage of £100,000 the penalty would be £2,000 to £5,000.

The majority of those seeking to remortgage are out of the tie in time.

Different mortgage lenders offer different interest rates, and a remortgage can often save a considerable sum of money.This is known as a like for like and grants the borrower a lower monthly payment, and of course the existing mortgage is fully repaid.

Sometimes a homeowner applies for a higher figure to enable him to have additional funds which he can then use for many purposes.and that is another important thing that these financial products have in common.

Why we state almost any purpose, is due to the fact that some homeowner loan lenders will not grant advances for the purchase of a time share or a holiday home, while others have no objections whatsoever.

Both of these types of loans can be low interest ways of paying school fees, an expensive holiday to celebrate a special birthday or anniversary, to purchase a vehicle of any kind or are excellent means of adding value, as well as comfort, to a property by paying for home improvements.

At present secured loans are available with interest rates from about 9%, while remortgage rates start at less than 2%..

They both have repayment periods of up tp twenty five years which makes them affordable, as they can be spread over all these years, making the payments affordable to most.

Both remortgages and secured loans are commonly used for debt consolidation which means that all outstanding debts on credit cards, personal loans, etc. are combined into one and a single low interest reapayment monthly replaces a number of high interest debts. For those in a mortgage tie in period, a homeowner secured loan would be the better choice, and this would also be the loan of choice if speed in receiving the funds was of paramount importance, as a secured loan takes, in general, half the time of a remortgage to arrange.