Secured Loans vs Remortgaging: Which Option is Right? | Halifax
Rachel in Birmingham needed £45,000 for a loft conversion. Her mortgage broker presented two options: remortgage her entire £180,000 mortgage plus the additional £45,000, or keep her existing 3.4% fixed rate and take a secured loan for the £45,000.
The remortgage meant losing her excellent rate and paying £5,400 in early repayment charges. The secured loan let her keep the low rate but charged higher interest on the £45,000 portion.
Which was cheaper? The answer surprised her—and it wasn’t what she expected.
Choosing between secured loans and remortgaging isn’t straightforward. Both involve borrowing against your property. Both carry serious risks. The right choice depends on your specific circumstances, existing mortgage terms, and how much you need to borrow.
Woodhall Mortgages in Halifax serves clients UK-wide via Zoom and Microsoft Teams. We help homeowners evaluate these options and make informed decisions about accessing property equity safely.
Critical Warning: Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
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Key Differences Explained
Remortgaging means replacing your entire existing mortgage with a new one. You might stay with your current lender or switch to a different one. The new mortgage amount includes your existing balance plus any additional borrowing you need.
Your old mortgage disappears. Your new mortgage covers everything. You make one monthly payment to one lender.
Secured loans (also called second charge mortgages or homeowner loans) sit alongside your existing mortgage. You keep your current mortgage completely unchanged. The secured loan is a separate borrowing secured against your property with a different lender.
You make two monthly payments—one to your mortgage lender, one to your secured loan provider. Both debts are secured against the same property.
The critical difference: Remortgaging disturbs your existing mortgage. Secured loans don’t.
This single difference drives everything else—costs, timing, suitability.
When Secured Loans Win
Your current mortgage rate is excellent. If you’re locked into a 3% to 4% fixed rate and current market rates sit at 5% to 6%, remortgaging makes no sense. You’d pay higher rates on your entire mortgage balance just to access additional funds. A secured loan charges higher rates only on the additional borrowing, whilst preserving your low mortgage rate.
Early repayment charges are prohibitive. Many fixed-rate mortgages charge 3% to 5% of the outstanding balance if you exit early. On a £200,000 mortgage, that’s £6,000 to £10,000. If these charges exceed the cost difference between secured loans and remortgaging, secured loans win.
You need funds quickly. Secured loan applications are typically completed in four to six weeks. Remortgaging often takes eight to twelve weeks. When contractors have availability or opportunities that are time-sensitive, speed matters.
Your income situation changed. Recently self-employed, having reduced hours, or having a variable income can make mainstream remortgaging difficult. Secured loan lenders often use more flexible affordability criteria and may accept income sources that mainstream lenders won’t.
You have minor credit issues. A satisfied CCJ or historic missed payment might restrict remortgage options or increase rates substantially. Secured loan lenders specialising in adverse credit may offer better terms than you’d achieve with remortgaging.
You’re already at high loan-to-value. If your mortgage already sits at 85% to 90% LTV, mainstream lenders may refuse to lend more. Specialist secured loan lenders sometimes work to 95% combined LTV, providing access to funds that remortgaging can’t.
You want to preserve product features. Your mortgage might include valuable features—cashback still being earned, low arrangement fees, or flexibility you’d lose by remortgaging. Secured loans preserve these benefits.
When Remortgaging Wins
You’re approaching the end of a fixed term. If your fixed rate ends in six months, waiting and remortgaging naturally makes sense. You avoid early repayment charges and secure better rates than secured loans offer.
Current rates match or beat your existing rate. If you’re paying 5.5% and new five-year fixes are available at 4.8%, remortgaging saves money. You improve your rate whilst accessing additional funds—a clear win.
You need large sums over long terms. Borrowing £100,000+ over twenty-five to thirty years typically works out cheaper through remortgaging despite secured loans’ flexibility. The rate difference compounds significantly over long periods.
You prefer single, simplified debt. Managing one mortgage payment feels simpler than juggling two secured debts. Some people value this simplicity even if it costs slightly more.
You want the best possible rate. First charge mortgages almost always offer better rates than secured loans. If preserving your current rate isn’t relevant, remortgaging delivers cheaper borrowing.
Your credit has improved since your original mortgage. If your credit score has increased substantially, you might access better remortgage rates than your current deal. This makes remortgaging financially attractive.
Your property has increased in value significantly. Sharp property value rises lower your loan-to-value ratio, potentially qualifying you for better rate tiers when remortgaging that offset any early repayment charges.
Cost Comparison with Real Numbers
Scenario 1: Mid-fixed term with heavy ERCs
Property value: £300,000 Current mortgage: £180,000 at 3.5% fixed (3 years remaining) Monthly mortgage payment: £900 Early repayment charge: 4% = £7,200 Needed: £40,000 for extension
Option A – Remortgage: New mortgage: £220,000 at 5.1% over 25 years Monthly payment: £1,289 Costs: £7,200 ERC + £1,000 fees = £8,200 Net available after ERCs: £31,800 Monthly increase: £389
To access the full £40,000, she’d need to borrow £48,200 to cover ERCs. New mortgage: £228,200 at 5.1% Monthly payment: £1,337 Monthly increase: £437
Option B – Secured Loan: Keep existing mortgage: £180,000 at 3.5% = £900/month Secured loan: £40,000 at 7.2% over 15 years Secured loan monthly payment: £365 Total monthly cost: £1,265 Monthly increase: £365 No ERCs paid
Verdict: Secured loan costs £72 less monthly, saves £8,200 in ERCs, and provides the full £40,000 needed. Clear winner.
Scenario 2: End of fixed term
Property value: £350,000 Current mortgage: £200,000 at 4.8% (fixed term ending in 2 months) Monthly payment: £1,150 No early repayment charges Needed: £50,000 for renovations
Option A – Remortgage: New mortgage: £250,000 at 5.0% over 25 years Monthly payment: £1,461 Costs: £995 arrangement fee Monthly increase: £311
Option B – Secured Loan: Keep existing mortgage: £200,000 at 4.8% = £1,150/month But the fixed term is ending, so we would revert to the lender’s SVR (typically 7% to 8%) Realistically needs to remortgage anyway Secured loan: £50,000 at 7.5% over 15 years Secured loan monthly payment: £465 Total monthly cost: £1,615 minimum (if original mortgage stays at 4.8%, unlikely) Monthly increase: £465+
Verdict: Remortgaging wins clearly. No ERCs, natural remortgage timing, and significantly cheaper overall.
Scenario 3: Excellent rate worth preserving
Property value: £400,000 Current mortgage: £220,000 at 2.9% fixed (4 years remaining) Monthly payment: £1,025 Early repayment charge: 5% = £11,000 Needed: £60,000 for works
Option A – Remortgage: New mortgage: £280,000 at 5.3% over 25 years Monthly payment: £1,698 Costs: £11,000 ERC + £1,200 fees To access full £60,000 after ERCs: borrow £291,200 New payment: £1,766 Monthly increase: £741
Option B – Secured Loan: Keep existing mortgage: £220,000 at 2.9% = £1,025/month Secured loan: £60,000 at 7.8% over 20 years Secured loan monthly payment: £502 Total monthly cost: £1,527 Monthly increase: £502 No ERCs paid
Verdict: Secured loan saves £239 monthly (£2,868 annually) plus avoids £12,200 in upfront costs. Massive winner.
Interest Rates Compared
First charge mortgages (remortgaging): Excellent credit: 4.5% to 5.5% Good credit: 5.0% to 6.0% Fair credit: 6.0% to 7.5% Poor credit: 7.5% to 10%+
Secured loans (second charges): Excellent credit: 5.5% to 7.0% Good credit: 6.5% to 8.5% Fair credit: 8.0% to 10.0% Poor credit: 10.0% to 14.0%+
Secured loans typically cost 1% to 3% more than equivalent first charge mortgages. This rate premium reflects lenders’ second position in the security queue.
On £50,000 over 15 years: At 5%: £395/month, £71,100 total repayment At 7%: £450/month, £81,000 total repayment At 9%: £507/month, £91,260 total repayment
The 2% difference between 5% and 7% costs £55 monthly (£660 annually) and £9,900 over the full term.
However, if accessing the lower 5% rate requires paying £8,000 in early repayment charges and accepting a higher rate on your entire existing mortgage balance, the secured loan’s 7% might still cost less overall.
Application Process Comparison
Remortgaging timeline: 8 to 12 weeks typically
Week 1-2: Research products, mortgage broker consultation, initial application Week 3-4: Full mortgage application, credit checks, income verification Week 4-6: Property valuation arranged and completed Week 6-8: Mortgage offer issued Week 8-12: Legal work, searches, completion
Secured loan timeline: 4 to 6 weeks typically
Week 1: Broker consultation, lender selection, application Week 2: Credit checks, income verification, documentation Week 3: Property valuation completed Week 3-4: First charge lender consent obtained (critical step) Week 4-5: Formal offer issued Week 5-6: Legal work, completion
Why secured loans are faster:
No property searches required. Less extensive legal work. Simpler process because the existing mortgage remains unchanged. However, obtaining first charge lender consent can delay things if that lender is slow to respond.
Documentation required for both:
Proof of identity and address Income evidence (payslips, accounts, tax returns) Bank statements (3 to 6 months) Current mortgage statement Property ownership documents Credit history review
Self-employed applicants typically need one to two years of accounts for remortgaging, but some secured loan lenders accept six to twelve months.
Credit Score Impact
Remortgaging credit impact:
A hard credit search appears on your file. The old mortgage gets marked as settled. The new mortgage appears as a new credit account. Overall impact is typically neutral if you maintain payments consistently.
Multiple remortgage applications within short periods can damage scores. Lenders see this as signs of financial difficulty or desperation.
Secured loan credit impact:
A hard credit search appears on your file. The secured loan appears as an additional credit account whilst your mortgage remains unchanged. Your total secured borrowing increases, which affects future affordability assessments. Your mortgage remains unchanged.
Missing secured loan payments damages credit severely—arguably more than missing mortgage payments because it signals you can’t manage multiple commitments.
Impact on future borrowing:
Having a secured loan can complicate future remortgaging. Some mainstream lenders refuse applications from borrowers with second charges. Others accept them but factor secured loan commitments into affordability assessments, reducing how much they’ll lend.
If you’re planning to remortgage within two to three years, consider whether taking a secured loan now might restrict future options.
Early Repayment Charges
Apply for the first two to five years of fixed or discounted rate periods. Charged as a percentage of the outstanding balance—commonly 5%, 4%, 3%, 2%, 1% in successive years. Some products charge flat percentages throughout (e.g., 3% for all five years).
On a £200,000 mortgage with 3% ERC = £6,000 On a £300,000 mortgage with 5% ERC = £15,000
ERCs drop to zero once you reach the end of your fixed or discounted period. After that, you can remortgage freely without penalties.
Secured loan ERCs typically:
Apply for the first three to five years. Structured similarly to mortgages—reducing percentages in successive years. Some secured loans charge ERCs throughout the entire term, not just the initial years.
On a £50,000 secured loan with 4% ERC = £2,000 On a £75,000 secured loan with 5% ERC = £3,750
Always check specific product terms. Some secured loans have no ERCs after the initial period. Others penalise early repayment throughout the loan’s life.
If your mortgage’s fixed term ends within twelve to eighteen months, waiting to remortgage naturally often makes more sense than taking a secured loan or paying heavy ERCs.
If you’re three to four years from your fixed term ending, secured loans might suit you better. By the time your mortgage term ends, you could remortgage both debts into one new mortgage without penalties.
Future Remortgaging Implications
Taking a secured loan today affects your ability to remortgage later. Understanding these implications helps make informed decisions now.
Some mainstream lenders automatically decline applications from borrowers with second charges. Others accept them but offer less competitive rates. Specialist lenders welcome second charges but typically charge more than mainstream lenders.
When you remortgage, lenders assess whether you can afford the new mortgage. They factor in all your existing commitments—including secured loan payments. This reduces how much they’ll lend.
Example: You earn £50,000 annually. A lender working to 4.5× income would typically lend £225,000. But if you have £400 monthly secured loan commitments (£4,800 annually), they might reduce lending to £203,400 (£225,000 – £21,600).
Combined loan-to-value limits:
Most remortgage lenders limit total secured borrowing (mortgage plus secured loans) to 80% to 90% of property value. If your combined borrowing exceeds this, you might struggle to remortgage even if you can afford repayments.
Options when remortgaging with existing secured loans:
Keep the secured loan: Remortgage your first charge only, maintaining the secured loan separately. This works if your new mortgage lender accepts second charges.
Consolidate everything: Remortgage large enough to pay off both your existing mortgage and secured loan. This requires sufficient equity and affordability to borrow the combined amount. You’ll pay secured loan ERCs if within their charge period.
Partial consolidation: Some borrowers remortgage to pay off part of the secured loan, reducing monthly commitments whilst keeping some of it separate.
Risk Assessment
Both options carry serious risks. Your home is at risk with both. Understanding specific risk profiles helps make informed decisions.
Affordability risk: Borrowing substantially more means higher monthly payments. Can you maintain these if income reduces or expenses increase?
Interest rate risk: Variable-rate mortgages expose you to payment increases if rates rise. Fixed rates protect you temporarily but eventually expire.
Negative equity risk: If property values fall and you’ve borrowed close to the property value, selling becomes difficult. You might owe more than the property is worth.
Lock-in risk: Choosing a long fixed term provides payment certainty but locks you into potentially uncompetitive rates if market rates fall substantially.
All the above risks plus:
Dual payment risk: Managing two separate secured debts doubles the administrative burden and default risk. Missing either payment puts your home at risk.
First lender complications: Your mortgage lender might restrict certain activities—switching products, porting the mortgage, or making overpayments—whilst a second charge exists.
Higher interest costs: Secured loans cost more than first mortgages. Over the long term, this rate premium significantly increases total costs.
Repossession priority: If repossession occurs, your mortgage lender gets paid first. The secured loan lender gets paid second. If sale proceeds are insufficient, you still owe the shortfall.
Neither option is risk-free. Both require absolute certainty that you can maintain repayments through income reductions, rate rises, and unexpected expenses.
Making Your Decision
Choose secured loans when:
Your current mortgage rate is significantly better than available new rates (2%+ difference).
Early repayment charges exceed £5,000 and would wipe out any remortgage savings.
You need funds within four to six weeks and can’t wait for longer remortgage timelines.
You’re self-employed, have complex income, or have minor credit issues that restrict mainstream remortgaging.
You’re already at high LTV and mainstream lenders won’t advance more.
Your mortgage has valuable features you don’t want to lose.
Choose remortgaging when:
Your fixed term ends within the next six to twelve months, naturally.
Current market rates equal or beat your existing mortgage rate.
You need to borrow very large sums (£100,000+) over long periods (25+ years).
You want simplified finances with one secured debt instead of two.
Your credit has improved significantly since your original mortgage and you’d qualify for much better rates.
You’re planning major life changes (selling, moving) within two to three years and don’t want secured loan complications.
Get professional mortgage advice. Brokers can model both scenarios using your specific numbers—exact amounts, rates, fees, and terms. They’ll show you total costs over five, ten, or fifteen years for each option.
What looks cheaper monthly might cost more long-term. What seems expensive upfront might save thousands over time. Professional modelling eliminates guesswork.
Common Questions
Can I remortgage to pay off a secured loan?
Yes. Many borrowers take secured loans, planning to remortgage both debts into one mortgage later. This works if you have sufficient equity and affordability when remortgaging. However, you’ll likely pay the secured loan’s early repayment charges if still within that period.
Will having a secured loan stop me from remortgaging?
Not necessarily, but it limits options. Some lenders decline automatically. Others accept second charges. A good mortgage broker knows which lenders take which approach and can identify suitable options.
Which option is cheaper overall?
It depends entirely on your specific circumstances—current mortgage rate, early repayment charges, how much you’re borrowing, and over what term. The only way to know definitively is to model both options with actual figures.
Can I have both a remortgage and a secured loan?
Yes, in theory. You might remortgage to access some additional funds whilst taking a secured loan for more. This suits limited circumstances and creates complex debt structures. Professional advice is essential.
What happens if property values drop?
With either option, falling values reduce your equity cushion. If values drop below your total borrowing, you’re in negative equity. This restricts your ability to sell or remortgage, but doesn’t immediately affect your situation if you maintain repayments.
How do I know my current mortgage rate is worth preserving?
Compare your current rate with available new rates for your circumstances. If you’re paying 3.5% and new rates are 5.5%, that’s a 2% difference worth preserving. If you’re paying 5.0% and new rates are 4.8%, the tiny difference isn’t worth the complexity of secured loans.
Can I get a secured loan with bad credit?
Possibly. Specialist secured loan lenders accept various credit impairments—satisfied CCJs, defaults and payment problems. Recent and severe issues prove more difficult. Expect rates of 9% to 12%+ reflecting elevated risk.
Which option is faster to arrange?
Secured loans typically complete in four to six weeks, versus eight to twelve weeks for remortgaging. However, individual circumstances vary—complex secured loan applications can take longer, whilst straightforward remortgages might complete faster.
Professional Mortgage Advice
These decisions involve substantial amounts and serious risks. Professional mortgage advice ensures you make informed choices based on accurate information rather than guesswork or assumptions.
What professional advisers provide:
Detailed cost modelling for both options using your specific circumstances. Access to whole-of-market products including exclusive deals not available directly. Credit report reviews identifying ways to improve terms. Affordability assessments showing realistic borrowing limits. Application support ensuring documentation is correct and complete. Ongoing support through the process until completion.
When professional advice is essential:
You’re unsure which option suits your circumstances better. Early repayment charges are substantial and you need to verify the best approach. You have complex income (self-employed, multiple income sources, variable earnings). You have any credit history issues affecting your options. You own multiple properties or have complex property portfolios. You’re planning other major financial changes (retirement, business sale, property portfolio expansion).
The cost of professional advice versus the cost of wrong decisions:
Professional mortgage advice typically costs nothing (brokers receive commission from lenders) or modest fees (£0 to £1,500). Making the wrong decision between secured loans and remortgaging can cost thousands—sometimes tens of thousands—in unnecessary interest, fees, and early repayment charges.
Getting expert guidance isn’t an optional extra. It’s essential protection against expensive mistakes.
Get Expert Mortgage Advice from Woodhall Mortgages
Choosing between secured loans and remortgaging isn’t straightforward. The right answer depends on your specific circumstances, existing mortgage terms, how much you need to borrow, and your future plans.
At Woodhall Mortgages, we specialise in helping homeowners across the UK navigate these decisions. Our advisers model both options using your actual figures, showing you exactly which approach costs less and suits your situation better.
We’re based in Halifax but serve clients throughout the UK via Zoom and Microsoft Teams consultations. Whether you’re in London, Manchester, Birmingham, Leeds, or anywhere else, we can help.
Our Services Include:
Whole-of-market mortgage advice – Access to thousands of mortgage products from over 90 lenders Secured loan expertise – Specialist knowledge of second charge mortgages and niche lenders Complex income cases – Help for self-employed, contractors, and those with variable earnings Adverse credit specialists – Solutions for CCJs, defaults, and credit impairments Portfolio landlord advice – Expertise for multi-property investors Remortgage guidance – Identifying the best deals and timing for remortgaging
Why Choose Woodhall Mortgages?
Independent advice – We’re not tied to any lender and always recommend what’s genuinely best for you Transparent fees – Clear information about costs with no hidden surprises Experienced advisers – Years of expertise helping clients with complex borrowing decisions National coverage – Helping clients across the entire UK via video consultations Comprehensive service – Support from initial consultation through to completion
Contact Woodhall Mortgages
Address: Woodhall Mortgages Croft Myl W Parade Halifax HX1 2EQ
Email: Available through our website contact form
- In-person appointments at our Halifax office
- Video consultations via Zoom or Microsoft Teams (available UK-wide)
- Telephone consultations
Office Hours: Monday to Friday: 9:00 AM – 5:30 PM Saturday: By appointment Sunday: Closed
Book Your Free Initial Consultation
We offer a free initial consultation to discuss your circumstances and explain your options. There’s no obligation, and you’ll get clear, honest advice about whether secured loans or remortgaging suits your situation better.
Call us on 01422 354011 or visit our website to book your consultation. We’re here to help you make informed decisions about accessing your property equity safely and cost-effectively.
Important Information
Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
Woodhall Mortgages is authorised and regulated by the Financial Conduct Authority (FCA). All advice is provided in line with FCA regulations and guidelines.
The information in this article is for general guidance only and should not be treated as specific financial advice for your circumstances. Mortgage products, rates, and terms vary constantly. Always obtain professional advice based on your specific situation before making any borrowing decisions.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
