Should You Take Out A Secured Loan?
As mentioned above, a secured loan (also referred to as a second-charge mortgage) is a way in which you can take out a loan against your property. By using your house as collateral for the loan, the lender will take a legal charge on your property. This means that if you default on the loan, the lender has the right to sell your property to recoup the outstanding debt.
A secured loan may be a good option if you need to borrow a large amount of money or you have a poor credit score or a limited credit history. This is because the loan is secured by your home and the lender may be more willing to lend to you than if you were applying for an unsecured loan. However, it’s important to remember that taking out a secured loan means putting your home at risk.
How Much Can You Borrow Against Your House?
The amount you can borrow against property depends on the value of your home and the amount of equity you have in it. Equity is the difference between the value of your home and any outstanding mortgage or other loans secured against it. For example, if your home is worth £300,000 and you have a mortgage of £150,000, your equity is £150,000.
Depending upon the lender, you may be able to borrow up to a certain percentage of your equity, usually between 70% and 90%. This means that if your equity is £150,000, you may be able to borrow between £105,000 and £135,000. If you are wondering how much you can borrow against your house, speak to one of our advisers today. By speaking with a mortgage broker such as ourselves, we’ll be able to tell you the exact amount you can borrow and whether a secured loan against your property is the best option for you.
Benefits of a Secured Loan Against Properties
1. Interest Rates & Fees
The interest rate on a secured loan is typically lower than on an unsecured loan because the lender has the security of your home. However, the interest rate you are offered will depend on several factors such as your credit score, the amount you want to borrow and the term of the loan.
2. Repayment Terms
The repayment terms of a secured loan will depend on the lender and the type of loan you take out. However, when taking out a loan against property, some lenders offer repayment terms of up to 25 years, which can be very beneficial for some borrowers.
3. High Loan Amounts
More often than not, the lender will loan more money than they would do on an unsecured loan but this depends on the value of the property and equity. Therefore, the more valuable your house is, the more you’ll be able to borrow against the property.
4. Ideal For Home Improvements
If you are planning a large extension or any other sizeable project, financing the home improvements is achievable with a secured loan.
5. Personal or Business Needs
Whether you want to purchase another property, land or have a business idea but no funds to start it, borrowing against your house is a great solution to consider.
Understanding The Risks
As mentioned earlier, taking out a secured loan means putting your home at risk. If you default on the loan, the lender has the right to sell your property to recoup the outstanding debt. This could leave you without a home and with a large debt to repay. Before you take out a secured loan, make sure you can afford the monthly repayments and that you understand the risks involved.
In addition to the risk of losing your home, taking out a secured loan can also affect your credit score. If you miss payments or default on the loan, this will be recorded on your credit report and could make it harder for you to borrow money in the future.
Are There Any Alternatives?
The main alternative to a secured loan against property is to remortgage. If you have equity in your home, you may be able to remortgage to release some of that equity. This can be a cheaper option than taking out a second-charge mortgage.
Conclusion
Loans against your house can be a good option if you need to borrow a large amount of money or you have a poor credit score or limited credit history. However, it’s important to remember that taking out a secured loan means putting your home at risk. Before you take out a secured loan, make sure you can afford the monthly repayments and that you understand the risks involved.
If you require further information regarding loans against your house, feel free to get in touch and we will try to assist where possible.