It’s often assumed that a remortgage is cheaper than a loan. But if you are looking to raise extra cash a loan could cost you less, especially if your circumstances prevent you from borrowing at the very best mortgage rates – more on typical circumstances below.

Typically remortgage lenders are also fussier than secured loan lenders.
So if you are looking to raise additional cash a secured loan may be both easier and cheaper.

How could a loan be cheaper than a remortgage?

If you have a mortgage at a decent rate now, because of your circumstances (time in job, loan purpose, self employed, credit history etc.), you may need to remortgage on to a higher rate. Therefore you are paying a higher rate on the total borrowings.

It may work out cheaper to keep the current rate on your mortgage and use a secured loan to raise the extra capital. Therefore only paying a higher interest rate on the extra money you are borrowing.

Let’s look at the maths on a hypothetical case.

To make the maths easier to follow we will assume the mortgage is interest only.

You want to borrow an extra £50,000.
You have a current mortgage of £250,000 at a rate of 2% – paying £416 per months.

Remortgage option

Your circumstances mean you can’t get the cheapest rate available so a new mortgage to raise the extra £50,000 would be at 2.9%.
£300,000 at 2.9% would increase your payments to £725 per month.

Loan option

Alternatively you could borrow the extra £50,000 with a separate loan at 4.1%.
Whilst the rate on the loan is higher than 2.9% the blended rate across all of your borrowings is lower and the repayments are lower too – as follows.

Keep your existing mortgage of £250,000 at 2% – pay £416 per month.
Borrow an extra £50,000 separately at 4.1% – pay £170 per month.

So the total monthly payments on the existing mortgage and new loan are £586 – That’s £139 per month cheaper than the remortgage. The numbers are for example purposes but you will get the idea.

Your Promise adviser will work out how much a new loan will cost along side your existing mortgage.

What if I have been turned down for a remortgage?

Your circumstances might mean you get turned down or you can’t get the competitive remortgage rates you want.

As we have said above, first mortgage lenders are fussier than secured loan lenders and at Promise we work along side thousands of mortgage brokers to help them arrange loans for their clients who have been turned down for a remortgage.

You can deal with a Promise adviser direct.

The typical areas where we find a secured loan easier to arrange than a remortgage are listed below. And remember, as per the example above it may cost less than a remortgage too.

  • Self employed – including less than 12 months trading
  • Contract / agency workers – including via umbrella companies
  • Income derived from benefits, pensions, child benefits, DLA etc.
  • Bad credit history – from a few missed payments to serious arrears, Court Judgements, IVA’s and even bankruptcies.
  • Debt consolidation – Our lenders like it – most remortgage lenders don’t
  • Loan purpose – business purposes, tax bills, surgery – pretty much any legal purpose.
  • Property construction – defective, unmortgageable, buy to let, HMO’s, commercial, shared ownership etc.

If you have you been turned down for a remortgage or want to compare the loan repayments try our repayment calculator and enquire about a fully underwritten quote.