The Difference In Secured Loans Now And Then
There have been a great number of changes in the secured loan market over the last few years.
Secured loans, otherwise homeowner loans, used to be the loan of choice for homeowners, as their rates were favourable.
These homeowner loans are only available to homeowners, as they require security in the shape of the equity in a property.
Equity is the difference between the value of a property and the outstanding balance of the mortgage secured on it
An example of this is, that if a property is worth 320,000 and the mortgage balance is 180,000, the equiity in this case would be 140,000.
Secured loans ere always a good alternative to a remortgage if the homeowner is in a tie in period with his current kender, meaning that he would incur an early repament penalty if he repaid the mortgage early.
Remortgages and secured loans can be used for the exact same purposes which include car purchase, funding home improvements, and they are also excellent for debt consolidation.
Debt consolidation via either a remortgage or a secured loan are very cost effective, and can save a great deal of money when high interest rate credit cards, personal loans, etc. are rolled into the one low interest secured loan or remortgage.
The secured loans sector has suffered even more than the other home loans of mortgages and remortgages, and fell by more than 80% from the start of the recession until the present Now, however, there are some improvements being witnessed.
Matters are certainly not back to the situation of three years or so ago, but they at last look like moving in the right direction at last.
Although these loans are supposed to require the equity in a property, before the recession, homeowners with very little equity could obtain loans at 125% LTV.
Homeowners with a mortgage of 190,000 and a property worth 200,000 could apply for a secured loan of up to 60,000.
Equity margins became restricted to 65% for self employed applicants, and for a time, the maximum LTV for employed applicants was lowered to 70%.
After a while at these rates, they were slackened to 70% and 80% for the self employed and employed respectively.
The heartening news is, that a few weeks ago, secured loans became available at 85% LTV for the employed and 75% for the self employed which will help more homeowners obtain one of these loans.
The self employed were worse affected than were the employed, as apart from having a more restricted LTV, self employed people could no longer self declare their own earnings, as they once could, and had to produce full accounts or at least an accountant's certificate.
There is also good news on this front as well, with the introduction of self certs yet again at 60% LTV.
The applicant must however prove his income by providing his last three months bank statements.
Self employed loans will be very beneficial to those only in business for six months.
Therefore, although we are no where near the liberal granting of secured loans, as in the past, but at least we are slowly but surely moving in the right direction.
by: Liz Moir
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