Secured Homeowner Loan

If you are a homeowner and you need to raise cash, you have two options. If you have no mortgage on your property (this is known as an ‘unencumbered property’) you would be able to remortgage for the amount that you need, up to the value of the available equity in the property. If you already have a mortgage on the house, you would need to take out a secured homeowner loan. A secured homeowner loan is also known as a ‘second charge’ loan, due to the fact that there is also a first charge on the house, i.e. the mortgage.

Secured homeowner loans are often taken out by people with poor credit, because the alternative is an unsecured loan where the lender has no guarantee of whether they will be able to pay the money back again. The interest rates on repayment of a secured homeowner loan are therefore much more reasonable, although for the consumer there is the added risk that if they do not keep up repayments on the loan, they may lose their property. If you have a good credit rating, your options are much greater, because you would be able to find a reasonable rate on either an unsecured loan or on a secured homeowner loan. A secured homeowner loan is the answer if you are looking to borrow a larger amount of money, because there is a limited amount that a lender will give you if you are not willing to put up your property as collateral. If you are unsure about which option is right for you, we would advise consulting a qualified financial adviser to go over all the options available to you in the market.

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Taking out a Secured Homeowner Loan: The Facts

• If you are taking out a secured homeowner loan, the lender will need to know the amount of equity available in your property as this will affect the amount that you are able to borrow.  
• Loans, as with any other credit, are eligible for early repayment charges if you decide to repay the money too early.   This is because the lender would lose out on a significant amount of interest if you pay back the money before the end of the agreed loan term.  Check with your lender before proceeding with your secured homeowner loan.
• If you are considering a second charge loan, that is, a secured homeowner loan on a property that is already mortgaged, for the purposes of debt consolidation, there may be better alternatives.  If you are struggling with debt, consider a debt management plan, or an informal arrangement with your creditors to avoid taking on the risk of securing your property against a loan. Visit our debt section to read more, and to apply for a debt specialist to call you back.