28 January 2011

What about a secured loan?

With all the recent headlines appearing in the national press on mortgage rates, are you looking to remortgage? Most lenders look to attract new customers, but are less likely to offer attractive options to stay with them. This, in the main, is due to the different fees and charges that can be added to the new mortgage at the outset. In the current climate, the lenders bottom line tends to be more profitable with new clients, rather than old. So don’t feel loyal, if a better option is with another lender; think of number one!

However, we’re still stuck with the fact that many lenders do not want to lend in huge volumes. Therefore, you may find that actually getting a mortgage becomes the main obstacle and you may have to stay with your current lender anyway!

The other option, if you’re looking to raise cash for home improvements, to consolidate debt (although not encouraged) or for another legal purpose, is a secured loan.

A secured loan is a 2nd, or subsequent charge, designed for homeowners which allows the equity in their property to be used as security. Loans are usually between £3.5k and £100k. There are also no 'up-front' fees to find.

We tend to find that many customers looking to remortgage to raise additional funds are already on an attractive rate with their lender. To move away could be costly and they could end up on a much higher interest rate. Depending on the amount already lent as a mortgage, compared to the value of the property, most lenders will allow a secured loan to be added as additional borrowing.

The secured loan is usually repaid over a shorter term than a mortgage, circa 3-7 years, but the term can be longer, although this will increase the amount of interest repaid. Rates vary depending on the customer’s circumstances and current level of borrowings.

As with all finance, seek advice and think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other loan secured on it!

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