Although this site is mainly focused on 125% secured loans, there are precious little of those to be found these days, so I wanted to write a post in more general terms about getting a home owner secured loan.
What exactly is a home owner secured loan? Well, the name is pretty self-explanatory really. It is a loan taken out by a home owner, secured against the property itself. Although typically these loans are used for home improvements such as a new kitchen or bathroom, or building work such as an extension or conservatory, they can actually be used for any purpose. Because the lender knows that the risk of non-payment is low, it is not too difficult to get a loan secured against your property, as long as you have positive equity in that property.
There are many advantages to getting a secured loan over a non-secured loan. First of all, the amount you can borrow is generally much higher. So if you do need to make a big purchase and spend a lot of money (say for example you need $30,000 to build a new extension), you have a much better chance of gaining agreement from the lender to borrow that sum than you would have if you were not securing the loan against your home.
Secondly, you generally have a longer time period to pay the loan back. Again, the lender knows you are a home owner and that you probably have a mortgage, which may have many years still to run. Often (particularly if you are borrowing from your existing mortgage lender) the secured loan can be tied in to the term of the mortgage, so you pay the two amounts together, which makes it easier t plan your cash flow and monthly outgoings.
Also, compared with a non-secured loan, a secured loan is generally a lot cheaper, with lower interest rates.
Of course the one major disadvantage of the secured loan for home owners is that if you default on the payments, you are in danger of losing your home. In that way, the loan is no different to a mortgage, because if you default on your mortgage payments, you also may face the possibility of foreclosure or reposession.
Our advice would be to only take out a home owner secured loan if you really need it (for example for home improvements that are absolutely necessary, or that you know will add some serious value to your property) and if you know you can afford the monthly payments. Otherwise, don’t do it, save up instead!
{ 0 comments }