Interest Rates vs Total Cost
Mortgage rates are typically 4% to 6%, while personal loan rates range from 3% to 10% depending on the amount and your credit score. On the surface, a remortgage looks cheaper. But the total cost depends on the repayment period, not just the rate.
A personal loan is usually repaid over one to seven years, while a mortgage runs for 20 to 30 years. This shorter term means you pay far less interest overall, even if the rate is higher. For example, £20,000 over five years at 7% costs about £3,800 in interest. The same amount added to a 25-year mortgage at 5% costs about £15,000 in interest.
Monthly Payments Compared
Where remortgaging wins decisively is on monthly affordability. Using the same £20,000 example:
- Personal loan (5 years at 7%) — monthly payment of approximately £396
- Remortgage (25 years at 5%) — additional monthly payment of approximately £117
The remortgage option costs about £279 less per month. If your budget is tight and you need breathing room, this monthly saving can be the deciding factor. But it comes at the cost of paying much more over the full term.
Risk and Security
The most important difference is what's at stake. A personal loan is unsecured — if you can't pay, the consequences are serious (damaged credit, potential CCJ, debt collection) but you don't lose your home. A mortgage is secured against your property — persistent non-payment could ultimately lead to repossession.
This risk is particularly relevant if your income is uncertain or you're going through a period of financial instability. An unsecured personal loan keeps your home separate from your debt obligations, which provides an important safety buffer.
Which Should You Choose?
Choose a personal loan if you can afford the higher monthly payments, you want to clear the debt within a few years, you prefer to keep the debt unsecured, or the amount is relatively small (under £15,000 to £20,000).
Choose a remortgage if monthly affordability is your main concern, you're remortgaging anyway and can combine purposes, the total debt is large enough that personal loan rates would be high, or you plan to overpay the extra mortgage borrowing to minimise total interest.
In many cases, a combination approach works well: consolidate the largest or highest-rate debts into the mortgage and keep smaller, manageable debts on a personal loan or 0% credit card.
Important: Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual rate available will depend on your circumstances. Think carefully before securing other debts against your home.