Secured Loans Second Mortgages

Secured Loans Second Mortgages



Secured Loans / Second Mortgages
During the​ past five years lenders have seen a​ boom in​ the​ demand for second mortgages as​ borrowers look to​ capitalise on​ the​ equity in​ their home. the​ low cost of​ borrowing coupled with the​ spiralling value of​ homes in​ the​ UK has led to​ a​ substantial strengthening of​ the​ equity position of​ many a​ homeowner. the​ equity position of​ some homeowners is​ in​ fact so strong that they now find themselves in​ the​ fortunate position of​ having more equity in​ their home than they have debts secured against their home on​ first mortgages and other loans.
Buoyed by the​ healthy state of​ positive property equity confidence is​ running high when it​ comes to​ homeowners committing to​ further borrowing. Many are taking the​ opportunity to​ secure second and even third charge loans against the​ equity in​ their property in​ order to​ release cash funds. Even the​ more conservative borrowers are now beginning to​ see the​ light,​ despite experts predicting of​ an imminent slowdown in​ the​ housing market.
If youre thinking about releasing equity in​ your home through a​ second mortgage,​ here are some things youll need to​ consider before you​ take the​ plunge
Interest rates on​ second mortgages
The interest rates charged on​ second mortgages are often higher than those that are levied on​ first mortgages. This is​ because lenders see second mortgages as​ a​ higher risk than first mortgages and so compensate for this risk through fixing higher interest rates on​ second mortgages.
The increased risk factor on​ a​ second mortgage is​ down to​ the​ fact that these types of​ mortgages are a​ second charge on​ the​ property. That is​ to​ say that in​ the​ event of​ you​ defaulting on​ repayment to​ the​ point that your home is​ repossessed,​ the​ first mortgage lender legally gets first bite of​ the​ cherry when it​ comes to​ recovery of​ the​ loan. For second loans secured against the​ property,​ the​ lender has to​ wait its turn,​ running the​ risk that it​ may recover only part of​ the​ loan advanced or​ in​ some cases none of​ the​ loan advanced.
Lending criteria
Different lenders have different lending criteria for second charge mortgages. Whilst all lenders are likely to​ assess applicants for a​ second mortgage on​ the​ value of​ their home,​ their ability to​ repay the​ loan and their current income to​ debt ratio,​ not all lenders will give the​ same weight to​ these factors in​ the​ final analysis. This is​ why you​ may be rejected by one lender but accepted by another on​ an almost identical second mortgage offer.
Can you​ afford the​ repayments?
For a​ lender to​ be convinced that you​ are able to​ meet the​ repayments on​ a​ second mortgage,​ youll need to​ be sure how youre going to​ repay the​ loan. you​ should never take on​ a​ second mortgage without first planning how you​ will pay the​ money back.
Different types of​ second charge mortgages
There are several different types of​ second charge mortgages to​ choose from. Be sure to​ get information on​ all your options and select the​ type of​ second mortgage that is​ most suitable for your circumstances. it​ is​ advisable to​ never borrow more than the​ current equity value in​ your home.




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