| Mortgages
and remortgages declined in the course of the credit crisis
with secured loans affected even more adversely.
Before
the recession, there were more than twenty secured loan lenders
operating, and homeowners were only too willing to take advantage
of the low rates and the array of different homeowner loan
plans on offer.
It was
possible to obtain a secured loan at 125% loan to value, which
meant that a homeowner could borrow up to 125% of the value
of the property
That was
to say, that secured loans were out there at up to 25% more
than the property was actually worth.
If a home
had a value of 200,000 and a mortgage balance of 190,000 secured
on it, in theory it was possible to obtain a loan of up to
60,000.
This plan
worked to an extent when property prices were rising steeply,
but when they statrted to fall, major trouble ensued for the
lenders offering these loans, such as First Plus.
These
125% loans were dropped like a hot cake, and even the common
loan to values of 115%, 100%, 95% and even 90% were abolished.
For a
time, the maximum LTV even for employed applicants was restricted
to only 70% until one lender, that is the Cardiff based Nemo
Loans, slackened the LTV for employed borrowers to 80%.
Nemo used
to provide loans to self employed people at 100% LTV, but
they totally abandoned the self employed loans sector.
Many homeowners
just could not obtain a secured loan due to almost being in
the negative equity trap.
Those
who were self employed suffered the worse fate, with the withdrawal
of self declarations of income, where it is possible to declare
one's own net profit without any official proof.
Accounts
were required which posed a major propblem to those who mainly
deal in cash.
Only very
recently Link Loans brought in a plan for self employed homeowners
enabling them to obtain self employed loans after only being
in business for six months.However the maximum LTV is 60%
and three months bank statements are needed to show earnings
being deposited.
However
it can offer a good alternative to those self employed who
cannot remortgage due to lack of accounts.
Secured
loans are to be available from Nemo Loans as of next week
at up to 85% LTV.
They are
also bringing back loans for the self empoloyed at 75% LTV,
but the borrower must produce an accountant's reference.
Things
look on the up as regards secured loans.
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