How can a secured loan be cheaper than a remo?

Published on

So, how can a secured loan be £215,000 cheaper than a remortgage? Well, lend me your ear for two minutes and I’ll show you:

A client approached Y3S a few days ago through his mortgage adviser looking to raise £100,000 to consolidate credit cards and unsecured loans, payments on which were approaching £3,000 a month. He was in the very fortunate position of having an excellent and reliable income, and a 0.49% above base tracker mortgage deal paying on an interest-only basis with £700,000 outstanding. The monthly payment being a little under £600 a month.

On approaching his adviser, he quickly came to the realisation that the lowest cost remortgage would be on capital repayment at 2% fixed for three years which was going to take his payments to £4,730 a month during the fixed period and then £5,646 a month after this. How unsettling. If he were to take the remortgage, he would still be more £2,000 a month worse off than his current situation.

His mortgage adviser had already completed several secured loans before; he therefore knew to check out the costs of a loan before admitting defeat. He logged into our secured loan sourcing system and carried out a remortgage comparison.

Within a few minutes, quotations from Nemo, Shawbrook and Blemain were compared with the cheapest available remortgage (Santander) for his circumstances and by taking a secured loan and keeping his current mortgage arrangement in place, the client will save over £3,200 a month rather than if he were to have remortgaged away to the lowest-cost product.

The application is now under way, and all things being equal, in a few weeks time the client will have refinanced his debt into a secured loan at 7.9% APR, matched to the 17-year remaining term of his mortgage. He will not have shelled out a single penny to set up the secured loan, and he will no longer be paying out £3,600 a month on his credit commitments. He will instead be paying £1,467, the cost of his mortgage interest payment plus the new secured loan repayment. He plans to use the savings to pay down the balance on his mortgage.

Over a five-year period, assuming rates have not increased, he will have saved £215,877.

And the introducer? He will earn £1,890 for introducing the client to us. The client, the broker and Y3S will have all benefited. It’s what you might call a win/win/win scenario…

Latest POLL

COMMENT ON MORTGAGE SOUP

We want to hear from you!
Leave a comment and get the conversation started.
You need to register to post, so please login or sign up below.

Latest articles

Berkeley Alexander appoints new BDM

General insurance provider Berkeley Alexander has announced the appointment of Grant Robinson as a...

Newcastle for Intermediaries adds three-year fix range to mortgage offering

Newcastle for Intermediaries has introduced a new range of three-year fixed rate products. It said...

Mortgage product availability surpasses 25,000 for the first time

The number of mortgage products available in the UK has reached an all-time high,...

ASG Finance launches loan for HNW investors

ASG Finance has introduced its latest funding initiative: the ‘Base Rate Beater’ secured investment...

Other news

Why it matters that bridging hit more than £10bn last year

We see many numbers bandied around in the financial industry, which can sometimes have...

Berkeley Alexander appoints new BDM

General insurance provider Berkeley Alexander has announced the appointment of Grant Robinson as a...

Newcastle for Intermediaries adds three-year fix range to mortgage offering

Newcastle for Intermediaries has introduced a new range of three-year fixed rate products. It said...