The Benefits of a Secured Homeowner Loan
A secured homeowner loan is, as its name suggests, a loan secured against your home. Secured homeowner loans need no upfront survey, legal or other fees. The loan can be used for most purposes, including paying off outstanding loans or credit cards and reducing your monthly repayments. Also, the loan can be used for home improvements, a new car, a wedding, a holiday or to inject capital into your business.
There are a number of specialist lenders willing to advance finance secured by way of a second charge against the your property over a period of between 5 and 25 years. In general terms, the maximum combined loan-to-value (LTV) of the existing mortgage, plus the proposed additional secured loan, should not exceed 90%. In fact, some lenders will restrict the maximum LTV to 80% if for business purposes.
As the lender would be second in the queue for security, this involves a slightly higher risk which means that a higher interest rate would be charged, the interest rate depending upon the applicant’s credit score. Although secured homeowner loans might be more costly in terms of the interest charged in some cases, the following advantages may apply.
- A secured loan may usually be raised much quicker than finance via a remortgage. Whereas it might typically take three weeks to arrange finance via a secured loan, it usually takes at least six weeks to remortgage.
- The applicant may be tied to a mortgage lender offering a low interest rate for say 3 or 5 years, which might involve early redemption charges if the mortgage is redeemed early. In using a secured loan, the mortgage can remain in place to avoid such a charge.
- Whilst the applicant may have a 25 year mortgage, they may not wish to extend his business finance for such a long term, which would be the case if they remortgaged.
- Finance raised via remortgaging cannot be offset against the future profits of a business for tax purposes. However, a separate secured loan can be clearly identified as being for business use and offset against tax accordingly.
When considering applying for a secured homeowner loan, it is wide to consult with a professional loan broker who will search the market and source the best secured loan for you from a wide panel of lenders.
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