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…