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, for some reason, cannot or choose not to apply for a normal First Charge Mortgage.
Secured loans are far more popular now as the rates on offer are much lower than previously available.
If you need to raise money against your property, there are 3 main options:
A further advance from your current Lender.
Moving to a new Lender via the route of a remortgage.
Second Charge mortgage.
For smaller amounts of borrowing, unsecured loans are also an option. If you opt for a Second Charge Mortgage your existing mortgage will stay in place the same as it is now with your current Lender and the extra funds will be with a different provider.
The second mortgage is on a different rate of interest with a different direct debit. Some people run their second charge loan over the same term as their main mortgage to keep payments low.
Some of the main reasons people take out additional borrowing are:
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 up front 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 is normally payable, and 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 pay additional 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.