Secured homeowner loans
Secured homeowner loans or second charge mortgages as they
are sometimes known, are personal loans secured by a second
charge on an already mortgaged property. It is possible
to obtain some secured loans using some other form of security,
but property is the normal option.
Secured personal loans tend to be cheaper than unsecured
personal loans, since they represent less of a risk for
the lender. The fact that this type of loan is secured against
your property basically means that the lender has a right
to take the asset off you if you don't pay off the loan
as you initially agreed, although they may well settle for
a reduced payment plan instead. Consequently, the rates
of interest on a secured loan will be lower because the
lender is taking on less risk.
Secured loans are generally available for sums of between
£3,000 and £150,000, repayable over 3 to 25 years, though
some lenders may lend more than this. Many lenders will
advance as much as 125% of the property value, but this
is only likely to be the case with relatively low value
properties.
The interest rate is usually a straightforward choice between
a fixed or a variable rate, making the choice rather less
complicated than when choosing a mortgage. A fixed rate
gives you the security that your repayments won't change,
but is likely to be more expensive. It also means that your
repayments will not be reduced should the lender cut their
lending rate of interest, from which borrowers on a variable
rate would benefit. This type of product may be available
on an interest-only or capital plus interest basis and can
normally be used for any purpose.
A second charge mortgage is usually made available primarily
to people in owner-occupied homes, including ex-council
properties. However, some lenders will lend to landlord
owners of tenanted property. As with normal mortgages, there
may be different rates of interest available to people with
an impaired credit history, or the self-employed who are
borrowing without evidence of their accounts.
