The UK, like the rest of the Western world, has been going through some tough economic times recently. Because things have been particularly tough for the banks, if you are looking into 125 Secured Loans as a way to borrow more than the value of your property, it is actually a lot harder to find a mortgage lender willing to grant you a loan in excess of 100% than it was maybe three or four years ago.
But there are still deals out there to be had, if you know where to look. The financial situation is of course changing constantly, so by the time you read this post the information on this website may be out of date but at the time of writing, lenders like BM Solutions and Mortgage Express are offering 125% Secured Loans.
The great thing about these loans is the fact that, if you are mortgaged up to 100% of the value of your property and you need more cash, you do not have to go to another lender or take out another loan, at a higher interest rate.
In terms of who can actually take out such a loan, the lenders tend to look at each application individually. If you have good credit history, you will of course stand a better chance of being successful. And some lenders prefer to offer these loans to existing customers rather than new borrowers.
The way the 125% Secured Loan generally works is that anything up to 100% of the loan is secured against the current value of your property and the remainder is either secured against other goods and possessions or, more commonly, unsecured. So in this respect, the name “125 Secured Loan” is actually a bit of a misnomer, a more descriptive name would be “125 partially secured loan” or something similar.
Because of banking regulations in the UK, the secured and non-secured portions of the loan are regulated differently. However some lenders will link the two portions so that in effect, they are treated as one loan from the borrower’s perspective.
Of course, there are a couple of downsides of 125 secured loans. First of all, interest rates are generally higher than standard mortgages. This makes sense because the risk to the lender is higher. The other disadvantage is that as a borrower, you need to make sure you are in a position to keep up the monthly repayments, which can be touch if you’ve borrowed more than your property is worth, at a relatively high interest rate.
If you do have a poor credit history, don’t worry, all is not lost. Some lenders will still offer you 125 secured loans under certain conditions, so it is certainly worth making enquiries. Whatever you do, always make sure you do thorough research before entering into any kind of credit agreement and never borrow more than you can afford to pay back.