subject: Some Information About Secured Loans And Remortgages [print this page] Whenever homeowners need a loan thay have the two options of secured loans and remortgages but many people are unsure about exactly how these two home loans work.
They are aware that a remortgage and a secured loan are homeowner loans and only available to homeowners due to the fact that they are secured on property.
It is correct that remortgages and secured loans are loans for which only homeowners are eligible as they do indeed require an asset of property., and they are both useful ways of funding almost anything including a holiday right up to a holiday home providing that there is sufficient equity in the property.
Remortgages and secured loans are also very popular for debt consolidation that rolls all outstanding credit card and personal loan debt, etc. into the one much lower payment.
Equity is paramount and what equity is is the difference between the mortgage balance and the value of the property.
As such if a house is worth say 280,000 and the mortgage balance is 150,000 the equity in this case would be 130,000.
It is however not possible at present to borrow the full 150,000. Lenders like to play safe.
Some mortgage lenders grant remortgages and mortgages at 90% but the majority restrict equity to 85%.
Loans to value for homeowner loans is currently 85% for employed applicants and 75% for those who are self employed.
The interest rates for remortgages is at present from 1.84% for a tracker remortgage at 60% LTV and from 2.99% for a fixed rate product.
Trackers track the base lending rate of the Bank of England and of course when this rate goes up so do tracker home loans.
Fixed rates as the very name makes clear are set at the same rate for a certain pre agreed period of most commonly between two to five years.
Secured loans have interest rates at from 9% for people with a good credit rating.
However those with very bad status can still obtain a bad credit loan at a higher interest rate and at a LTV of between 50% to 60%.
Bad credit loans can certainly be of great use in sorting out the credit of those who have fallen into arrears in their mortgage, credit cards and loans sometimes through no fault of their own but due to the recent harsh economic climate
After a few years when the credit file is clean they can then take out a status remortgage or secured loan at a better rate of interest.
Although remortgages have lower rates of interest than secured loans the latter can be the better choice if the borrower is in a tie in period with his current mortgage lender and would incur an early repayment penalty which can cost from 2% to 5% of the outstanding balance.
Another occasion when a secured loan may be preferable is if the applicant is self employed when it is essential to produce full acounts whereas some secured loan lenders grant loans with a self declaration backed up by bank statements, trade invoices, etc.
The main difference is that a remortgage replaces the current mortgage whereas a secured loan is a separate entity..
by: Liz Moir
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