Secured Loan vs Remortgage Calculator: How to Compare the True Cost

Inputs Needed for an Accurate Calculation

To use a secured loan or remortgage calculator meaningfully, you need three core inputs: the loan amount (how much you want to borrow); the loan term (how many years over which you will repay); and the interest rate or APR (the cost of borrowing expressed annually). Each of these inputs has nuances that affect the accuracy of the result.

The loan amount should reflect what you actually need, not the maximum available. Borrowing more than you need to achieve a lower rate tier is counterproductive if the additional capital and interest cost more than the rate saving. Be specific about the purpose and the amount you genuinely require.

The loan term significantly affects both the monthly payment and the total cost. A longer term reduces the monthly payment but increases the total interest paid. For example, £50,000 at 8% over 10 years costs £607 per month and approximately £22,800 in total interest. The same loan over 20 years costs £418 per month but approximately £50,400 in total interest — more than double. The monthly saving comes at a very high total cost price.

The interest rate input is where most calculator comparisons go wrong — see the section on representative versus actual APR below. Use your most realistic expected rate, not the headline rate shown in advertisements, for the most accurate comparison.

Understanding the Calculator Output

A well-designed secured loan calculator should output at minimum: the monthly payment; the total amount payable (monthly payment multiplied by term); and the total interest cost (total amount payable minus the original loan amount). Some calculators also show the APRC (Annual Percentage Rate of Charge), which includes fees as well as interest and gives a more complete picture of the true cost of borrowing.

The total cost is the most important figure for comparison purposes, not the monthly payment. A secured loan with a higher monthly payment on a shorter term may cost significantly less in total than one with a lower monthly payment on a longer term. Always compare total costs, not just monthly payments, when evaluating options.

When comparing a secured loan to a remortgage, ensure you are comparing equivalent scenarios. A remortgage calculator typically shows only the new mortgage portion — but if you are remortgaging to raise capital, you should compare the total cost of the new mortgage (including the capital raised and the existing balance) against the existing mortgage plus a secured loan over the same period. Failing to like-for-like compare leads to misleading conclusions about which option is cheaper.

Representative APR vs Your Actual APR

This is the most important limitation of any advertised calculator or rate. Lenders are legally required to show a representative APR in their advertising, which is the APR that at least 51% of approved customers receive. This means up to 49% of successful applicants receive a higher rate. Borrowers with imperfect credit, higher LTV, non-standard income, or less common property types will typically receive a rate above the representative figure.

The gap between representative APR and actual APR can be very significant in the secured loan market, where specialist lenders price risk individually. A product advertised at a representative APR of 8% might offer rates ranging from 6% for low-risk prime borrowers to 15% or more for higher-risk cases. Using the representative APR in your calculator will produce a monthly payment and total cost that may be substantially lower than what you will actually be offered.

To get an accurate calculation, request personalised indicative quotes from a whole-of-market broker using soft searches before you apply. The broker can give you the rate you are likely to actually receive — or a range of rates from different lenders — which you can then input into the calculator to produce a meaningful cost comparison. Calculators used with indicative personalised rates are genuinely useful; calculators used with advertised representative rates are illustrative at best.

Comparing Secured Loan Against Remortgage: A Framework

The classic comparison between a secured loan and a remortgage to raise capital involves three scenarios. First, the status quo — your existing mortgage continues, and you add a secured loan for the new borrowing. Second, a full remortgage — you refinance your entire mortgage balance plus the new borrowing onto a single new product. Third, a further advance — you borrow more from your existing mortgage lender, often on a separate rate attached to your existing deal.

Each scenario has a different total cost depending on the current rate on your mortgage, any ERC you would face by remortgaging early, the rate available on the new secured borrowing, and the term of each element. Calculators are most useful when you model all three scenarios on a total-cost basis over the same horizon — for example, the next five years — to identify which option is cheapest in total, not just which has the lowest monthly payment on the new borrowing alone.

The scenarios where a secured loan typically wins on total cost: when your existing mortgage has a very competitive rate with significant ERC remaining (remortgaging would be very expensive); when your existing lender's further advance rate is higher than the secured loan market rate; and when you only need the additional borrowing for a relatively short term. The scenarios where remortgaging typically wins: when there is no ERC or it has expired; when your existing rate is high relative to current market rates; and when the combined new rate covers both your mortgage and additional capital at a lower blended cost.