Secured Loan or Remortgage for Expats: Which Should You Choose?
When you need to raise money against a UK property while living abroad, there are two usual routes. A remortgage replaces your existing mortgage with a new, larger one. A secured loan, usually a second charge, sits behind your existing mortgage and leaves it in place. Which is cheaper depends on your current rate, how much you need and how long you need it. This guide explains both and compares them with a worked example. It builds on our page on secured loans for expats.
This guide is general information, not financial advice or a recommendation. Rates, fees and lender criteria vary and change often, and the example below uses invented figures.
The short answer
- A remortgage replaces your whole mortgage, so the new rate applies to the full balance.
- A secured loan keeps your first mortgage, with its rate and terms, and adds a separate loan behind it.
- Secured loans generally cost more per pound borrowed, because the lender ranks behind the first lender.
- A secured loan can win when your existing mortgage rate is low and you need only a modest sum, but check early repayment charges either way.
How each one works
With a remortgage you borrow a new, larger amount from the same lender or a new one, repay the old mortgage and continue with a single loan. With a secured loan, a second lender takes a legal charge on the same property behind your first mortgage. You keep paying the first lender as before, and make separate payments on the new loan. The first lender normally has to consent to the second charge.
When a remortgage tends to win
- You are near the end of a fixed rate, so there is little or no early repayment charge.
- You need a large sum relative to the value of the property.
- You want one payment and one lender.
- Current mortgage rates are lower than your existing rate.
When a secured loan tends to win
- Your existing mortgage has a low rate that you want to keep.
- You would pay a large early repayment charge to leave your mortgage.
- You need a modest amount, or need it fast, because second charges often complete in two to four weeks.
- Your first lender will not lend more to a borrower living abroad.
A worked example
This example uses invented figures and compares interest only, ignoring fees. Your UK property is worth £400,000. You owe £150,000 on a mortgage at 3.0% fixed with two years to run, and you need £60,000.
| Remortgage | Secured loan | |
|---|---|---|
| What you borrow | £210,000 in one new mortgage at 5.5% | £150,000 at 3.0% kept, plus £60,000 at 8.5% |
| Yearly interest | £11,550 | £4,500 plus £5,100, which is £9,600 |
| Total borrowed against the property | £210,000 (52.5%) | £210,000 (52.5%) |
| Early repayment charge on the old mortgage | Possible, for example 2% of £150,000, which is £3,000 | None, because the first mortgage stays |
While the low fixed rate lasts, the secured loan costs £1,950 a year less in interest, and avoids the possible £3,000 early repayment charge. Once the fixed rate ends, the picture changes, because your first mortgage may reset to a higher rate while the loan stays at its own rate. Compare over the period you will actually hold each loan, not just the first year.
A second example: the fixed rate is about to reset
Now change one fact. Your 3.0% fixed rate ends in three months, and the mortgage would then reset to 5.0%. The secured route would then cost £7,500 on the first mortgage plus £5,100 on the loan, or £12,600 a year. A remortgage at 5.0% on the full £210,000 would cost £10,500. Once the low rate is about to disappear, the reason for keeping the first mortgage largely goes with it, so the remortgage is more likely to win. The same loan can be the better or the worse choice depending on the date.
Documents lenders usually ask for
- Identity and proof of address.
- Evidence of income, such as payslips or accounts, and recent bank statements.
- Your existing mortgage balance, rate and any early repayment charge.
- Details of the property and any tenancy.
- What you will use the money for, because the purpose affects whether the loan is regulated.
Costs beyond the rate
- Arrangement, valuation and legal fees, plus any broker fee.
- Early repayment charges on the existing mortgage, if you remortgage.
- Early repayment charges on the new loan, if you repay it early.
- The term: a long term lowers payments but increases the interest you pay overall.
- Currency conversion and transfer charges on payments sent from abroad.
The expat angle
Few lenders offer either product to non-residents, and each has its own list of accepted countries. Your current lender may not offer a further advance or a new deal to a borrower living abroad, which can push you towards a specialist. Lenders will ask for evidence of overseas income, and may discount income paid in a foreign currency. Our guide to a UK mortgage on foreign-currency income explains how that works, and our page on remortgaging while abroad covers the mortgage route in more detail.
The risks
Both routes are secured on your property, which may be repossessed if you do not keep up repayments. A second charge ranks behind the first, so if the property is sold the first lender is repaid first. Secured loans are regulated if they are secured on a home you or your family live in, and often not regulated for business or investment purposes, so check which protections apply.
Questions to ask before you choose
- What is the early repayment charge on my existing mortgage today, and when does it fall?
- Will my current lender lend more, or let me have a second charge, while I live abroad?
- What is the total cost of each route over the time I will hold it?
- What is the rate on the secured loan after any introductory period?
- Can I repay the new loan early, and what would it cost?
Related reading
If you are raising money to let a property, see our guide to an expat buy-to-let mortgage, and see how to keep up payments with our guide to paying a UK mortgage from abroad. For the wider picture, see our expat financing hub, our overview of property finance for expats and our page on a second charge loan for expats.
Frequently asked questions
What is the difference between a secured loan and a remortgage?
A remortgage replaces your main mortgage. A secured loan sits alongside it, so your existing rate and terms stay.
Is a secured loan more expensive than a remortgage?
Per pound borrowed, usually yes. But if you keep a low-rate first mortgage, the overall cost can still be lower, so compare the total.
Can an expat get a secured loan on UK property?
Yes, with lenders that accept non-residents. The choice is narrower and each has its own country list.
Does my first lender need to agree?
Usually yes. The second charge lender normally asks for the first lender’s consent.
Can I remortgage while living abroad?
Often yes, but your current lender may not offer it to non-residents, so you may need a specialist lender.
How long does each take?
A second charge is often two to four weeks. A remortgage from abroad can take longer, because overseas documents take time to check.
This article is for information only and is not financial advice or a recommendation. Your home may be repossessed if you do not keep up repayments on a mortgage or a loan secured on it. Take regulated advice before you borrow.
