Personal Loan vs Remortgage

showmethecash

Hello
Apologies in advance if I am in the wrong category but I wondered if you were to take a personal loan vs a remortgage and expect to pay it back within the same period of time, would you simply go with the one with the lowest interest rate (putting aside unsecured personal loan vs secured property loan considerations)

Thanks

[Deleted User]

The danger is that you re-mortgage then down the line find yourself back in debt, it can be a vicious circle, that said it depends how much you want to borrow and for what?

MinuteNoodles

You absolutely cannot put aside the secured vs unsecured consideration and it's worth paying a bit more in interest for the unsecured option.

MEM62

The two are very different products.  A mortgage will be secured and typically carry a lower interest rate over a longer period of time.  A personal loan is unsecured and would not put your assets at immediate risk if you defaulted.  Which one you choose very much depends on your circumstances and the purpose for the borrowing.  Without the background to your request we could not steer you towards one in favour of the other.  

IAMIAM

I like the idea of secured due to the rate.
Secured Rate lets say is 1.5% and you pick the term which could be the same term as a loan (5 years).
These days the rates for secured far lower than unsecured and the term you dictate from the outset. 
So really, unsecured is costing you more.

Nebulous2

Any fees with the secured loan? Valuation? Solicitors fees? Land registry fee? Where can you get a secured loan for 1.5%? 

My decision would probably be informed by the amount. If you intend borrowing up to £20k or so I’d go unsecured personal loan. 20 to 30 I’d weigh up the costs. Over £30k I’d expect to go secured. That takes you outwith the consumer credit limit. 

For high earners those figures could well be higher. 

IAMIAM

HSBC 75% LTV Additional Borrowing for existing customer.
Valuation Free
Solicitor Not Needed, Existing Mortgage and Customer
Land Registry Fee Free, not a purchase or remortgage

MinuteNoodles

IAMIAM said:

I like the idea of secured due to the rate.
Secured Rate lets say is 1.5% and you pick the term which could be the same term as a loan (5 years).
These days the rates for secured far lower than unsecured and the term you dictate from the outset. 
So really, unsecured is costing you more.

Is it? The reason they're lower rates is because you're putting up collateral in case you default, in this case your home. If you miss payments on the loan and default then with a secured loan they can ultimately force the sale of your home to repay the loan.
And that's why it's madness. There's going to be a lot of people with secured loans who've recently been laid off or furloughed through Covid-19 who are currently having squeaky bum moments panicking about how they manage to repay secured loans and keep their homes.

Durban

MinuteNoodles said:

IAMIAM said:

I like the idea of secured due to the rate.
Secured Rate lets say is 1.5% and you pick the term which could be the same term as a loan (5 years).
These days the rates for secured far lower than unsecured and the term you dictate from the outset. 
So really, unsecured is costing you more.

Is it? The reason they're lower rates is because you're putting up collateral in case you default, in this case your home. If you miss payments on the loan and default then with a secured loan they can ultimately force the sale of your home to repay the loan.
And that's why it's madness. There's going to be a lot of people with secured loans who've recently been laid off or furloughed through Covid-19 who are currently having squeaky bum moments panicking about how they manage to repay secured loans and keep their homes.

It's not always madness. 

 It depends entirely on your personal circumstances and what the money is going to be used for. If you are a key worker and unlikely to lose your job or a pilot or restaurant chef where it is much more unstable.

It also depends on the remaining balance of your mortgage. If it's say for £20,000 and your mortgage balance is £15,000 , that make a total mortgage of £35,000 on a very low interest rate.

Your age can make a difference as well. You could be within a few years of drawing your work pension that encompasses a lump sum that could be used to pay it off.

showmethecash

Thanks for all the feedback. My specific circumstance is I am in what I consider a secure job and have been in it for 12 years and am in my 40s. I am looking to borrow £30k for a kitchen extension. I have planned that I can afford to pay this back over 10 years as it will be an extra £200-£350 per month.
I have been quoted 1.70% for a secured loan (from my mortgage provider) + fees, which comes to £34.5k in total or 3..3% for an unsecured personal bank loan which comes to £35.5k. So in the interest of saving £1k I am leaning towards the secured option. Does this help provide context and clarity of what you might lean towards if you were in my shoes?