Does a Secured Loan Affect Remortgaging Later?

Why does a secured loan matter when you remortgage?

It comes down to priority at HM Land Registry. Your current mortgage lender holds the first charge on your home and your secured loan lender holds the second. When you remortgage, the new lender repays your existing mortgage and that first charge is removed. Without further action, the secured loan would move up to first position and the new mortgage would sit behind it, which no mainstream mortgage lender will agree to. Our guide on what a second charge means explains how priority works.

So the new lender's solicitor has to deal with the secured loan one of two ways before completion: repay it in full so the charge is discharged, or obtain a deed of postponement from the secured loan lender agreeing that its charge will rank behind the new mortgage. Either way, the secured loan is on the critical path, and a case that ignores it will stall.

There is also an affordability angle. If the secured loan stays, its monthly payment is a committed outgoing in the new lender's calculation, which reduces how much you can borrow. If it is being repaid from the advance, most lenders exclude it, as our guide on whether lenders ignore debts you are paying off explains.

What is a deed of postponement and will the lender agree to one?

A deed of postponement is a short legal document in which the secured loan lender agrees that its charge will rank behind the new mortgage, even though the new mortgage is registered later. It lets you remortgage your main borrowing without touching the secured loan, which is useful if the secured loan has an early repayment charge, or if the new mortgage lender will not lend enough to repay it.

Consent is not automatic. The secured loan lender will look at the new mortgage amount and will usually only agree if the new first charge is no larger than the one it is replacing, or larger by a modest margin, because a bigger first charge pushes its own position further back. Many will refuse a postponement where the remortgage raises significant extra capital, and some charge an administration fee for the deed. Expect the request to take two to four weeks.

Not every mortgage lender is willing to sit in front of a postponed second charge either. Some mainstream lenders will not lend at all where a second charge remains, and others cap the combined loan-to-value. A qualified adviser will know which lenders take which view and will steer the case accordingly. Checking your options in this way will not affect your credit score.

How do advisers sequence a remortgage when there is a secured loan?

The usual order is to decide the fate of the secured loan first, then choose the mortgage lender, then run the legal work. In practice, that means:

• Get a redemption statement from the secured loan lender showing the balance, any early repayment charge and the daily interest, so you know what it costs to clear.
• Compare the two routes. Repaying the loan from a larger remortgage against keeping it under a deed of postponement, looking at total cost and whether the new lender will offer enough. Our secured loan vs remortgage comparison shows how the numbers are built.
• Choose the lender to fit the route. If the loan is being repaid, most lenders treat the case as a straightforward debt consolidation remortgage. If it stays, the choice narrows to lenders that will sit ahead of a postponed second charge.
• Instruct the solicitor early to request the postponement or the redemption figure, since both take time and the mortgage offer has an expiry date.

On completion day, if the loan is being repaid, the solicitor sends the redemption money to the secured loan lender at the same time as repaying the old mortgage, and both charges are discharged. If it stays, the deed of postponement is registered alongside the new mortgage. Either way, the secured loan lender is told what is happening; you cannot remortgage around it quietly.

When is it better to clear the secured loan before remortgaging?

Usually, when the numbers say so. If the secured loan rate is well above the mortgage rate you can now get, and its early repayment charge has ended or is small, folding it into the remortgage tends to cost less per month and often less overall, provided you do not stretch it over a much longer term than it has left. If the secured loan is fixed at a rate close to the new mortgage rate, or carries a large early repayment charge, keeping it under a postponement can be the cheaper option.

Timing matters too. If your mortgage deal ends in six months and the secured loan's early repayment charge ends in twelve, it may be worth taking a short product transfer with your existing lender, and doing a full remortgage that clears everything once both are free. An adviser can model the total cost of each sequence.

The one thing not to do is let the secured loan fall into arrears while you plan. Missed payments on a second charge are visible to the new lender and can push you to a specialist rate or block the remortgage, and because the loan is secured, arrears also put your home at risk of repossession. If the combined payments are becoming difficult, free and impartial advice from MoneyHelper, StepChange or Citizens Advice should come before any refinancing plan.