Discussion On Secured Loans

Normally homeowner loans are in fact simply another name for secured loans, although it is also possible to be a homeowner and obtain an unsecured loan

However in general, when we talk about homeowner loans, we are thinking about the secured form, especially now that it is more difficult than ever to be granted an unsecured loan.

Secured homeowner loans, as the name suggests, are loans that are only available to those who own their home and as such tenants are excluded.

Also, as the name clearly states, these loans also require some sort of guarantee, and when it is a matter of residential loans, the asset is the property of the applicant.

These loans are, as already stated, secured against the bricks and mortar of a home, or more accurately the equity of a property.

Equity is the difference between the property value and the mortgage balance, and if someone has lived at his address for some time, there should be a considerable equity.

The above statement is not true of the last few years when property prices not only failed to go up, but in fact they went down.

If a home is worth 200,000 and the mortgage secured on it is 100,000 the equity would be 100,000.

Since the recession, there have been no 100% equity plans, with the maximum LTV being 80% for employed applicants and 70% for those who are self employed.

Therefore, based on the above example, an employed borrower could obtain a loan of up to 60,000 and the maximum loan available to a self employed applicant would be 40,000.

In addition to equity being of paramount importance, there are also certain other requirements such as status, income, etc.

Most homeowner loan lenders take 40% of gross income, that is 40% of the income before the deduction of income tax,etc. to cover certain financial out goings which in this instance is the monthly mortgage repayment, the loan being arranged and any outstanding credit on credit cards, loans, hire purchase, etc. which are not being consolidated with the homeowner loan.

Some loan providers do accept 50% of income instead of 40% which can make a considerable difference in the income being taken into account, especially if the applicant has a high salary.

After the broker or lender has received your secured loan application and ascertained that it fits as regards income and equity, they will then, with your permission, carry out a credit check which shows your outstanding credit, including normally your mortgage,and any arrears on loans, credit cards, hire purchase, mortgage, defaults and CCJ's.

If the secured loan lender is happy to lend after this, you will be sent a copy of your credit agreement along with written confirmation of the documentation that you are required to provide.

The information will be three wage slips, proof of residency less than two months old, I.D. in the shape of a passport, details of credit cards, etc. that you intend clearing with the loan, and often these days, lenders also require three months bank statements.

You are then given a minimum of an eight day consideration period,, that is cooling off period, before you receive the credit agreement to sign, and this must always be posted to, and not handed to the applicant.

When you sign this and return it along with all required documentation, you should receive your loan within a few days, after which you can do almost anything with your secured loan.