What is a Secured Homeowner Loan?
A secured homeowner loan is a loan which homeowners can use to borrow money against their home. There are various names for these types of loans, but in essence it is a loan secured on your home. These loans are also known as secured loans, second charge loans, Debt Consolidation loans, Home Improvement loans. A loan secured against a property would essentially get ‘piggy backed’ on top of the mortgage on the property, hence why it is sometimes known as a second charge loan. The mortgage holder normally has first charge on a property.
Why would anybody opt for a Secured loan?
There are various reasons why someone would opt for a secured loan, the main reasons are listed below:
Easier to obtain – The criteria is simpler and the lender is provided with security of having a charge over the borrower’s property. Therefore more willing to lend the money. The rates are more competitive for a secure loan than for unsecured borrowing (credit cards, loan, HP, etc)
Quick to get your money – Secure loans can complete relatively quickly, anything from 2 to 4 weeks.
You can borrow over a longer time period – Unsecured lending normally has shorter lending period typically 5 to 7 years whereas with a secured loan it can go from 5 to 20 years. By extending the repayment period to 20 years will reduce the monthly payment, it will however increase the amount of interest paid over the term. Secured loan lenders also prefer to have a longer term as this offsets the higher setup fees.
Bigger borrowing is possible – Secured loans can get borrowing of up to £100 000, depending on the clients situation. Whereas with an unsecured loan this amount of money may not be possible to borrow.
Competitive mortgage rate – The mortgage maybe at a very competitive rate and you would not want to remortgage and lose the rate.
Mortgage Tied in – The mortgage may have tie in period and it would be costly to remortgage to another lender to draw out the funds required. Once the tie in period has finished the mortgage and secured loan can be remortgaged into one mortgage, if required.
Credit Rating has Deteriorated – The main mortgage may be with a high street lender at a competitive rate, and the clients credit rating has deteriorated, so instead of moving to an adverse lender for more funds and paying a higher rate, a secured loan with an adverse secured loan may work out cheaper overall. You would need to get quotes for both situation s and see what works out cheaper.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBTS SECURED ON IT.
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