The Costs of Buying a Home

How To Get a Secured Loan

Secured Loans, or to give them their official title, Second Charge Mortgages used to be known as last-resort lending. They tend to be applied for by applicants who aren’t able to apply for a normal First Charge Mortgage. Because of their rates being lower than before, Secured loans are now far more popular.

You have 3 main options when it comes to raising additional funds against your property:

  1. A further advance from your current Lender
  2. Remortgage to a new Lender
  3. Second Charge mortgage

If you’re only borrowing a small amount, unsecured loans are also an option for you.

Opting for a Second Charge Mortgage will mean your existing mortgage will stay without any changes and with the current, whilst the extra funds will be with a different provider. The second mortgage is on a different rate of interest with a different direct debit. To keep payments low, some people run their second charge loan over the same term as their main mortgage.

There are a wide variety of reasons that people raise additional funds secured against their property. These include:

  • Home improvements
  • Debt consolidation
  • Purchasing cars or other vehicles
  • Paying for a wedding/honeymoon/special anniversary/holiday
  • Injecting cash into businesses
  • Paying for school fees
  • Paying tax bills
  • Cosmetic surgery

There are some typical reasons why a Second Charge Mortgage may be more suitable than a Further Advance or Remortgage:

  • You want to retain your current mortgage if it has a low-interest rate
  • You choose to retain your current mortgage because it’s interest-only and you prefer to keep it that way
  • You have gone self-employed since you took out the original mortgage
  • Your income is derived from multiple sources
  • You have a poor credit score· You want to avoid a Remortgage due to large redemption penalties on your current deal
  • You need to raise funds very quickly
  • You are looking to raise capital against your UK property to purchase foreign property
  • You prefer to avoid all upfront setting up costs
  • Your current mortgage lender has declined your further advance application
  • You are raising funds to pay a tax bill
  • You want to raise funds to purchase another property which isn’t currently suitable for a mortgage (non-standard construction/property in poor repair)
  • You need to inject cash into a business
  • You need capital to pay business tax liabilities or to clear a business overdraft

When applying for a secured loan, a broker fee and a lender arrangement fee are normally payable. These can be paid upfront or you can elect to add them to the loan.

Please be aware that if you do add fees to the mortgage, you will be paying extra interest. You will also end up paying more interest back if you extend the term of any debts you are considering consolidating.

If you are securing debts that are currently unsecured you are putting your home at risk if you do not keep up the repayments.

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