Can You Remortgage with a Secured Loan?
It’s possible to remortgage if you have a secured loan attached to your property. But the lender will take this second debt into account, which could limit your options.
Remortgaging means moving to a new mortgage deal, either with your current lender or a new one. People choose to remortgage for several reasons. You might be looking to borrow more on your mortgage to pay off your secured loan or simply want to see if you can get better mortgage terms.
Already have a secured loan or thinking about taking one out? It’s important to understand how this type of borrowing may affect your mortgage options, now and in the future.
In this guide we will explain how secured loans work and how they may influence remortgaging. Then, we’ll talk you through the options you might want to think about. Our aim is to help you feel informed when deciding what to do next.
How do secured loans work?
A secured loan is a way of borrowing money using an asset as security. This is often your home. When you use your property as security, it’s usually called a secured homeowner loan.
Because the loan is backed by an asset, lenders see it as lower risk and may be more comfortable offering larger loan amounts. The interest rate could also be lower than what you’d get with an unsecured loan.
It’s important to understand the risks too. Repayments on a secured loan are due alongside your existing mortgage. If you struggle to keep up with repayments on a mortgage or any other debt secured on it, your property may be at risk of repossession.
Does a secured loan affect remortgaging?
Yes, a secured loan may affect your ability to remortgage. This is because lenders will take it into account when considering your application.
When you apply for a new mortgage deal, the lender will evaluate your financial position before making a decision. This usually includes checking whether you could comfortably manage the monthly repayments. They’ll look at things like your income, everyday living costs and any existing borrowing you’re already repaying – including your secured loan.
They’ll likely also consider your credit history. This shows how you’ve managed repayments on your secured loan, among other things.
The process of remortgaging with a secured loan may be more involved than normal remortgaging. For example, there may be extra legal work, which could mean additional fees. The process might also take longer than usual.
How to remortgage with a secured loan on your house
If you want to remortgage and already have a secured loan, there are two main routes for you to look into. The right option will depend on your circumstances and what feels manageable for you.
1) Remortgaging to repay your secured loan
One option to think about is increasing your mortgage when you remortgage and using the extra funds to repay your secured loan. This may help simplify your repayments by bringing everything under one lender.
In some cases, the interest rate on the new mortgage could be lower than the rate of the secured loan. However, borrowing more could also mean making repayments for longer, which may result in you paying more interest overall.
Whether this is possible will depend on how much you could potentially borrow when you remortgage. That usually comes down to factors like your affordability and how much equity you have in your property.
It’s also worth looking at other ways you might repay the loan instead of adding it to your mortgage. Considering all your options can help you decide what feels right for you.
2) Remortgaging without repaying your secured loan
Repaying your secured loan when you remortgage isn’t the only option. You may also be able to keep it alongside your mortgage. This could be the case if borrowing more on your mortgage is not affordable for you.
If you choose this route, you’ll need to look for mortgage lenders that accept remortgage applications from people who already have a secured loan. Not all lenders do. Checking this early on may help you avoid applying for a mortgage that isn’t suited to your situation.
Understand your options with Evolution Money
It’s sensible to think about how borrowing today may affect your options in the future. Taking out a secured loan could have an impact if you decide to remortgage later on, so it’s worth understanding how everything fits together.
At Evolution Money, we provide tailored secured homeowner loans for people in a wide range of circumstances. One of our advisers can talk things through with you and help you understand whether this type of borrowing could be suitable for your situation.
You’re welcome to get in touch with us for a free, no-obligation conversation. And if you’d like, you can also check your eligibility with us without any impact on your credit score.
Loans are subject to status and affordability checks. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debts secured on it
Representative 21.54% APRC (Variable)
For a typical loan of £12,000 over 60 months with a variable interest rate of 21.54% per annum, your monthly repayments would be £310.60. This includes a Product Fee of £1,200.00 (10% of the loan amount) and a Lending Fee* of £763.00, bringing the total repayable amount to £18,635.80. Annual Interest Rates range between 8.6% to 27.87% (variable). Maximum 50.00% APRC. *Lending Fee varies by country: England & Wales £763, Scotland £1,051, Northern Ireland: £1,736.
Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
