Secured Loans And Second Mortgages

Where from? Some building societies (may only be offered to existing borrowers), banks, finance houses.

How they work A secured loan is any loan which gives the lender a claim on your property - usually your home - if you fail to keep up the repayments. Because the lender, as a last resort, can force you to sell your home so that they can get back their money, interest rates for secured loans should be lower than for comparable unsecured loans. A mortgage is a secured loan. A second mortgage is the same as a secured loan except that the lender is queuing up for repayment behind your existing mortgage lender.

Interest may be charged at a fixed or a variable rate, and the loan will be for a fixed period of time. Some lenders invite you to take out life insurance to repay the loan (in a similar manner to an endowment mortgage) but this isn't worth doing unless you intend to keep the loan for at least ten years.

You don't have to go to your existing mortgage lender for a secured loan or second mortgage. If you do, it will usually be treated quite separately from your existing mortgage.

Points to note You may have to pay for a surveyor to re-value your home, and there may be an arrangement fee of £100 or so. There may be charges if you want to repay the loan early. Some finance houses in particular, tend to charge fairly high rates of interest, so check other sources. Some lenders charge a bit less where the loan is to be used for home improvements.

Verdict Can be a useful source of loans for any purpose, but only worth considering if you can't get an unsecured loan at a reasonable cost or an extension to your existing mortgage.

For more information about Ombudsman And Referee Schemes

Extending Your Mortgage

Where from? Existing mortgage lender.

How the scheme works Your mortgage lender may be willing to make you a further loan and add the amount to your existing mortgage. You pay off both loans, either as two separate loans or as one loan made up of the two lumped together.

Points to note - You may have to pay for a surveyor to re-value your home. The new lo won't qualify for tax relief. With some lenders, you might find that e tending your existing mortgage means that the whole amount you're borrowing is taken out of the MIRAS scheme - this means that your monthly payments will be... see: Extending Your Mortgage

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