Secured Homeowner Loans - an Added Advantage

by : Gracy Bonsu

Taking a loan against your home is a traditional and time-tested way of borrowing money. This is the only way that allows you to borrow large amount of money. Otherwise, lenders do not sanction a large amount. The equity that your home holds in the market is taken into consideration before sanctioning any loan. The maximum loan to equity ratio is usually 100 per cent. It means that if your home has a value of ?250,000, you may get a loan of an equal amount.

In the prevailing circumstances in the UK financial markets, lenders have been badly affected by the global credit crunch. Their cost of borrowing has increased and, therefore, the lending rates are also going in the upward direction. Many lenders have even withdrawn unsecured personal loans from the market. However, if you have a good credit history, you can easily get better interest rates on secured homeowner loans.

In case of secured homeowner loans, you have to put your home as security for the loan amount. The process involves a fair amount of risk but if you plan your repayments, there is no reason to feel worried. Repossession only happens when you fail to repay despite warnings.

Homeowner loans offer you flexibility in repayment of loan amount. Many lenders provide benefits like repayment holidays, option to choose from fixed, capped and variable interest rate plans, loan to value ratio of up to 125 percent, 25 years repayment period, etc. If you have opted for payment protection insurance, you will feel assured even in case you lose your job or capability to earn. Payment protection insurance covers your repayments in several cases. At the same time, this insurance policy raises the total cost of homeowner loans. So, you should decide whether it is beneficial for you to opt for loan insurance or you want a loan without any insurance cover.