Secured loans vs remortgages

Secured Loans are proving more popular than ever with the UK’s intermediaries, with recent figures showing that nearly half of all IFAs placing business with two to five lenders. So what’s making secured loans so popular? With improved regulation from the Financial Services Authority in recent years, IFAs are realising that in many situations a secured loan provides a more appropriate and beneficial funding solution to clients’ when compared with more traditional approaches, such as remortgages.

A remortgage was once the preferred way of obtaining additional finance – a ‘no-brainer’ you would think when you compare rates with unsecured finance. There are, however, times where it is not advisable to remortgage when seeking additional finance. The most obvious of these scenarios being holders of fixed term rate mortgages. Howard Soltau, Managing Director of leading secured loan house Beech Finance, explains, ‘Homeowners looking to free up capital before the term is up are more than likely to incur redemption charges, in some case this can be up to 6%.” But it might not end there, with Soltau adding, “Beyond redemption charges, the remortgage process also carries further costs including valuation, legal and admin fees, and in many cases, broker fees, discharge fees, title insurance and telegraphic transfer fees.” Clearly, in this scenario, the secured loan option represents a better avoidance option with far fewer penalties.

For borrowers suffering from an adverse credit history on their original mortgage, secured loans can again have many more advantages. In most case, the chances are that raising additional finance would mean paying a higher interest rate on the entire amount of the remortgage, i.e. the full amount. In such situations, clients opting for secured loans can still benefit from the prime rate of interest on the original mortgage whilst only being charged a higher ‘non-conforming’ rate on the new secured loan component.

As the name suggest, a secured loan is protected against assets (usually the borrower’s property). This means that lenders are infinitely more flexible even in cases of adverse credit such as county court judgements (C.C.J's), defaults and arrears. And Beech Finance is no exception. MoneyBox learned that they have a very impressive application to completion conversion rate with Soltau saying “As a master broker, Beech Finance has very well established relationships with many secured lenders giving our introducers numerous options…One lender that stands out with its flexible approach to lending is Blemain who consider all clients with unlimited adverse credit and offer discounted payment options.” He also added “We also have a strong reputation for looking at every case on an individual basis and we understand that there’s a very important human element to be considered beyond just the raw numbers”

Here’s our summary of the key benefits of secured loans when compared with a re-mortgages: 

Loans behind sub-prime 1st mortgages
 

Loans to pay bankruptcies and IVAs
 

Self certification available
 

Loans for unusual properties
 

No need to re-mortgage and pay high redemption fees on existing mortgage
 

Max. 2 months redemption penalty on loans below £25,000 for your client
 

Interest only loans
 

Discounted and deferred available
 

Embraces the FSA TCF and Best Advice policy in certain circumstances
 

Arrears and adverse catered for

Granted, there are many factors you need to consider when determining the most advantageous financial solution for your client. Calculating the total cost of borrowing should always be high on your agenda and, in doing so, secured loans might just be the quick and favourable option for you and your clients.

Why use Beech Finance?

Simple application process
 

Generous commission & reward scheme
 

All fees & processing costs covered by us regardless of application outcome
 

Superb application to completion conversion rate
 

A dedicated Business Development Manager to oversee your deals
 

Fast, friendly & professional service
 

PPI sold compliantly on your behalf on all your introduced loans
 

No other cross selling - guaranteed.

To find out more about Beech Finance and their generous commission structure for IFAs, which is as high as 3.25% and includes an Over-ride Rewards Scheme, simply follow the link below:

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