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Secured Loans
Both let you borrow against your home, but they work in very different ways. This guide compares the costs, speed, and risks of each so you can see which fits your circumstances.
A secured loan is a second borrowing arrangement secured against your home, sitting alongside your existing mortgage. A remortgage replaces your current mortgage entirely with a new, larger one from the same or a different lender.
The right choice depends on your current mortgage rate, how much equity you have, how quickly you need the funds, and whether your circumstances would pass a full mortgage affordability check. There's no single option that suits everyone, only the one that fits your situation. Speak to an advisor to compare both against your actual numbers.
Weighing up a secured loan vs remortgage? If you're a homeowner looking to release equity from your property, these are the two main options. Both let you borrow against your home's value, but they work quite differently and suit different circumstances.
Homeowners often use these options to raise money for things like home improvements or debt consolidation. The right choice depends entirely on your personal situation - there's no universal answer. Someone part-way through a competitive fixed-rate mortgage will have very different priorities to someone whose deal is about to end.
Important: Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Both options carry this risk, so make sure you can comfortably afford the repayments before proceeding.
Quick verdict:
A secured loan, also known as a homeowner loan or second charge mortgage, lets you borrow money using the equity in your property as security. It sits alongside your existing mortgage rather than replacing it. For a broader introduction, see our complete guide to secured loans.
Both secured loans and remortgages involve using your home as collateral. This means that if you fail to keep up with repayments, you risk losing your home.
When you take out a secured loan, a legal charge is placed on your property. Your original mortgage remains the first charge and takes priority, while the secured loan becomes the second charge. This ordering matters because if you ever sold your home or fell into arrears, your mortgage would be repaid first, then the secured loan.
You'll make two separate monthly payments: one to your mortgage lender and one to your secured loan lender. Each has its own interest rate, term, and conditions.
You'll generally need at least 15-20% equity in your property after the loan. For example, if your home is worth £300,000 and your mortgage balance is £200,000, you have £100,000 equity (33%) and could potentially borrow against a portion of this.
Secured loans
Remortgaging means replacing your current mortgage with a new one, either with your existing lender (a product transfer) or a different lender. If you're borrowing additional funds at the same time, this is sometimes called a capital raise remortgage.
When you remortgage, your new lender pays off your existing mortgage completely. You then have a single new mortgage for the combined amount: what you still owed, plus any additional borrowing.
For example, if you owed £150,000 on your current mortgage and wanted to borrow an extra £30,000, your new mortgage would be for £180,000 with your new lender.
Most mainstream lenders require at least 10-15% equity, though more competitive rates typically need 25-40% equity.
Remortgaging
Understanding the true cost of each option means looking beyond the headline rate and factoring in arrangement fees, valuation fees, legal costs, and any early repayment charges.
Secured loans typically come with higher interest rates than remortgages. This is because secured loans, including second charge mortgages, are usually seen as higher risk by lenders and are repaid after your main mortgage in the event of repossession.
On the face of it, remortgaging often looks considerably cheaper. But the true cost depends on your specific circumstances, particularly whether early repayment charges apply to your current mortgage.
Both options come with setup costs that can significantly affect the overall expense.
The figure that catches people out is the early repayment charge on their current mortgage. If you're within a fixed-rate period, your lender may charge a percentage of your outstanding balance to leave early. On a mortgage with a few years left on a fixed deal, this can run into thousands of pounds, and it can make remortgaging far more expensive than a secured loan even when the headline rate looks better.
When comparing quotes, don't just look at the monthly payment or the headline rate. Add up the total amount repayable over the full term, then add every fee, including any early repayment charge. A secured loan with a higher rate but no exit penalty can sometimes work out cheaper overall than a remortgage that triggers a large early repayment charge. Equally, if you have no early repayment charge to worry about, a remortgage's lower rate usually wins over the full term. Ask an advisor for a like-for-like comparison based on your actual numbers rather than estimating from published rate tables, which change frequently.
We regularly see people focus purely on the interest rate and miss a bigger early repayment charge lurking on their current mortgage. Always ask for the full cost comparison, including every fee, before deciding.
The choice between a secured loan and a remortgage depends on your personal circumstances. Here are the situations where a secured loan typically makes more sense.
If you locked in a low mortgage rate a few years ago, you're unlikely to find anything close to it in today's market. Remortgaging to borrow more would mean giving up that rate on your entire mortgage balance, not just the extra amount.
Example: James has a tracker mortgage at a rate well below what's currently available. Remortgaging to borrow an extra £25,000 would mean losing this rate entirely. Instead, he took a secured loan for just the £25,000, keeping his favourable rate on the rest of his mortgage. Despite the secured loan's higher rate, his combined monthly payments worked out lower than remortgaging everything would have.
Early repayment charges can wipe out any rate savings from remortgaging. These charges typically reduce over time, often by a percentage point per year remaining on the deal.
Example: Sophie needed £35,000 for home improvements. With several years left on her fixed deal, leaving early would have triggered a significant early repayment charge. A secured loan with a higher interest rate still worked out cheaper overall than remortgaging and paying that penalty.
Secured loans can complete in a matter of weeks, sometimes faster, making them a popular choice if you need to raise funds quickly. Remortgages typically take longer, especially if there are complications.
Example: Mark needed to pay a tax bill within 30 days. A secured loan completed well within that window, while remortgage quotes were showing much longer timelines. The higher rate was worth avoiding the penalties and interest on his overdue tax bill.
Mortgage lenders have strict affordability criteria. If your income has dropped, you've become self-employed, or your outgoings have increased since your original mortgage, you might struggle to pass a remortgage affordability check.
Secured loan lenders often have more flexible criteria, particularly for self-employed borrowers or those with complex income.
Example: Priya had been self-employed for 18 months after leaving her corporate job. Most mortgage lenders wanted 2-3 years of accounts. Her secured loan lender accepted 12 months of bank statements, allowing her to borrow the £50,000 she needed for business investment.
If your credit score has dropped since you took out your mortgage, through missed payments, defaults, or high credit utilisation, you may find remortgage options limited or expensive.
Secured loan lenders include specialists who work with borrowers with imperfect credit, including our guide to secured loans for bad credit. Rates will be higher, but approval is often possible where remortgaging isn't.
Compare your options
We compare a wide range of lenders to help you see which option could work out cheaper for your circumstances.
Remortgaging makes more sense in several common situations.
If your fixed rate term is ending soon and you'd otherwise move onto your lender's standard variable rate, remortgaging to a new fixed deal will almost certainly save money. Standard variable rates are typically a few percentage points higher than the best fixed rates available, so waiting until your deal ends before deciding can be costly.
Example: Tom's 5-year fix was ending in 6 weeks. By remortgaging to a new fix and borrowing an extra £30,000 at the same time, his monthly payment increased by far less than it would have if he'd let his mortgage roll onto the standard variable rate and then taken a separate secured loan.
If mortgage rates have fallen since you took your current deal, remortgaging could reduce your costs even without borrowing more.
Example: Lisa took a 2-year fix when rates were considerably higher than they are now. Remortgaging reduced her monthly payment, and she also borrowed an extra £20,000 for home improvements while still paying less than before.
Managing two separate loans isn't for everyone. If you'd prefer the simplicity of a single monthly payment to one lender, remortgaging rolls everything together into one credit agreement.
The rate difference between secured loans and mortgages becomes more significant as amounts and terms increase. Remortgaging can let you borrow more against your home, making it a popular choice for large projects or major expenses.
Example: The Hendersons needed £80,000 for a major extension. Even after accounting for remortgage fees, borrowing this through a remortgage worked out significantly cheaper over 20 years than a secured loan for the same amount, because the rate gap compounds over a long term.
If your credit score has improved significantly since your original mortgage, you may now qualify for better rates than you're currently paying. Lenders assess your credit history when considering a remortgage application, so an improved credit history can help you secure more competitive terms.
Rather than guessing, work through this framework to see which option suits your circumstances. It's also worth speaking to an advisor, who can compare secured loan and remortgage options against your actual numbers. For more detail on borrowing limits, see our guide on how much you can borrow with a secured loan.
Step by step
Check your current mortgage details
Find your current interest rate, when your fixed or discounted period ends, any early repayment charges that would apply if you left now, your current monthly payment, and your outstanding balance. You'll find this on your annual mortgage statement or by calling your lender.
Calculate your available equity
Your equity determines how much you could borrow with either option. The formula is property value minus outstanding mortgage. For example, a home worth £350,000 with a £220,000 mortgage leaves £130,000 of equity. Most lenders won't let you borrow all of it - expect to access 75-85% depending on the product and your circumstances.
Get quotes for both options
Get actual quotes for a secured loan and a remortgage rather than guessing at rates. For secured loans, this usually involves a soft credit check that won't affect your credit score. For remortgages, many advisors can give indicative figures before running full checks. Ask for costs that include all fees, not just the headline rate.
Calculate the total cost over the loan term
For each quote, work out the total repayments over the full term, then add every fee, including any early repayment charge on your current mortgage for remortgage options. The option with the lowest total cost isn't always the right choice, you might prefer a slightly more expensive option for its flexibility or speed, but at least you'll be making an informed decision.
Consider your future plans
Think about what might change over the loan term. Might you move house? Both loans usually need repaying from the sale proceeds. Could you need to remortgage later? A secured loan affects future remortgage options, as lenders factor in your total debt. Might your income change? Consider whether you could still afford payments if your circumstances shifted.
These are the errors we see homeowners make most often when weighing up a secured loan against a remortgage.
Focusing only on the interest rate
A lower rate doesn't always mean lower total costs. Factor in all fees, including any early repayment charge on your current mortgage. We've seen people pay far more in exit penalties than they saved in interest.
Ignoring your current mortgage rate
If you're on an excellent rate, protecting it with a secured loan can work out cheaper overall than remortgaging to a different deal. Always calculate the impact on your total monthly outgoings, not just the new borrowing.
Extending your term unnecessarily
Spreading borrowing over a much longer term dramatically reduces your monthly payment but can nearly triple the total interest you pay over the life of the loan.
Not shopping around
Rates and fees vary considerably between lenders. The difference between the cheapest and most expensive secured loan for the same borrower can run into thousands of pounds over the term. Always compare multiple options.
Consolidating debt without addressing the cause
Using secured borrowing to consolidate credit card debt can reduce your monthly payments significantly, but you're converting existing debts, often unsecured, into a loan secured against your home, so your home is at risk if you can't keep up repayments. If you then build up card balances again, you haven't solved the problem, you've made it worse.
Both secured loans and remortgages involve using your home as collateral. Missing multiple payments on either can lead to serious consequences, including legal action, damage to your credit history, and repossession of your property.
Many secured loans and some mortgages have variable rates that can increase if the Bank of England base rate rises. Before committing, work out whether you could still afford payments if rates increased by 2-3 percentage points.
Taking a secured loan affects your debt-to-income ratio, which lenders assess when you apply for future credit, including remortgaging. It can also affect your loan-to-value ratio and the range of lenders willing to consider a future application. If you plan to remortgage in a few years, check whether a secured loan now could limit your options later. When you do remortgage, you may be able to consolidate the secured loan into the new mortgage or keep it separate, though keeping it separate can complicate the process and not all lenders allow this.
Both secured loans and remortgages often come with early repayment charges if you want to repay early. Check these before committing, especially if you might sell your home, come into money, or want to switch deals within the fixed period.
Fees for valuations, legal work, and arrangement charges are typically non-refundable if you decide not to proceed. Understand what you're committing to before instructing solicitors or paying for valuations.
If you're struggling with existing repayments or worried about affordability, free and impartial guidance is available from MoneyHelper at moneyhelper.org.uk or on 0800 138 7777.
Common questions
A secured loan, sometimes called a second mortgage, is an additional loan secured against your property that sits alongside your existing mortgage. You'll have two separate contracts and two monthly payments. Remortgaging replaces your current mortgage entirely with a new, larger one, so you have just one mortgage contract and one payment. The fundamental difference is whether you're keeping your existing mortgage and adding a second loan, or replacing it altogether.
Remortgages typically have lower interest rates than secured loans, because secured loans are considered riskier for lenders and are usually repaid after your main mortgage if you default. But the lower rate isn't always the cheapest option overall once you factor in early repayment charges and fees, so it's worth comparing the true total cost of both. Speak to an advisor for current rates for your circumstances.
Secured loans typically complete in a few weeks, sometimes faster for lower amounts that don't need a property valuation. Remortgages generally take longer, sometimes longer still if there are complications with title, valuations, or legal work. If speed is important, a secured loan is usually the quicker route.
Initial eligibility checks use a soft search, which doesn't appear on your credit file or affect your score. A full application triggers a hard search, which other lenders can see. Using a broker minimises hard searches, because we only move to a full application with lenders likely to accept you.
Yes, secured loans are often more accessible than unsecured products for people with adverse credit histories, because the property security reduces the lender's risk. Specialist lenders will consider applications with past missed payments, defaults, or even a debt management plan, though rates are typically higher than for those with a clean credit history. Speak to an advisor about the options available for your circumstances.
It depends on the amount and lender. Many secured loan providers don't require a formal valuation for loans below certain thresholds, instead using desktop valuations or automated systems. This speeds up the process and reduces costs. Remortgages almost always require a valuation, though these are sometimes free through the lender.
Both your mortgage and secured loan must be repaid from the sale proceeds. Your mortgage (first charge) is paid off first, then your secured loan (second charge) is settled. You keep whatever's left. If the sale doesn't cover both debts, you'd still owe the remaining balance. If you default on a secured loan, the lender can repossess your home, but they must wait until the first mortgage lender is paid off first.
Most secured loans allow early repayment, though many include an early repayment charge during an initial period, typically one to five years. This charge often equals a couple of months' interest. After that period ends, you can usually repay without penalty, but always check the specific terms of any loan you're considering.
Both depend on your available equity and affordability. Secured loans typically offer £10,000 to £500,000, while remortgages can go higher. Most lenders cap total borrowing at 75-85% of your property's value. Your income, outgoings, and credit score also affect how much you can borrow.
Yes, it can. When you apply to remortgage in future, lenders will factor in your secured loan payment when assessing affordability. It can also affect your loan-to-value ratio, credit score, and the range of lenders willing to consider your application. You may have the option to consolidate the secured loan into your new mortgage or keep it separate, though keeping it separate can complicate the remortgaging process and not all lenders allow this.
Missing payments on either option damages your credit score and triggers arrears charges. If you consistently can't pay, the lender can ultimately repossess your home. If you're struggling, contact your lender immediately as they're required to treat you fairly and may offer payment holidays or restructured terms. Free and impartial guidance is also available from MoneyHelper on 0800 138 7777 or moneyhelper.org.uk.
Both options are available. An advisor searches across a wide range of lenders and may access deals not available directly. They also handle paperwork and explain your options. Going direct avoids advisor fees but limits you to that lender's products. For secured loans especially, advisors often find better options due to the specialist nature of the market.
Most advisors and comparison services offer eligibility checks that use soft credit searches to give an indication of your chances of approval without affecting your credit score. These aren't guarantees, but they give useful guidance before you commit to a formal application.
Yes, though you'll need to provide evidence of income. Most lenders want 2-3 years of accounts or tax returns. Some secured loan lenders are more flexible, accepting 1-2 years of bank statements or accounts, making them more accessible than mortgage lenders for recently self-employed borrowers.
Secured loans typically involve broker fees, arrangement fees, and possibly valuation fees. Remortgages typically involve arrangement fees, valuation fees (often free), legal fees (often free), and potentially early repayment charges on your existing mortgage. Fees vary considerably between products, so always get full cost breakdowns before committing.
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Secured Loans
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