The Benefits of a Secured Homeowner Loan

A secured homeowner loan is, as its name suggests, a loan secured against your home. Secured homeowner loans require no upfront survey, legal or other fees. The loan can be used for many purposes, including paying off outstanding loans or credit cards and reducing your monthly repayments. Also, the loan can be used for home improvements, a new car, a wedding, a holiday or to inject capital into your business.

There are a number of specialist lenders willing to advance finance secured by way of a second charge against the your home over a period of between 5 and 25 years. Generally speaking, the maximum combined loan-to-value (LTV) of the current mortgage, plus the proposed extra secured loan, should not exceed 90%. In fact, some lenders will restrict the maximum LTV to 80% if for business purposes.

As the finance lender would be second in the queue for security, this involves a slightly higher risk which means that a higher interest rate would be charged, the interest rate depending upon the applicant’s credit score. Although secured homeowner loans might be more costly in terms of the interest charged in some cases, the following advantages may apply.

• A secured loan may usually be raised much quicker than finance using a remortgage. Whereas it might typically take three weeks to arrange finance via a secured loan, it usually takes at least six weeks to remortgage.
• The applicant may be tied to a mortgage lender offering a low interest rate for say 3 or 5 years, which might involve early redemption charges if the mortgage is redeemed early. In using a secured loan, the mortgage can remain in place to avoid this charge.
• Whilst the applicant may have a 25 year mortgage, they may not wish to extend his business finance for such a long term, which would be the case if they remortgaged.
• Finance raised via remortgaging cannot be offset against the future profits of a business for tax purposes. However, a separate secured loan can be clearly identified as being for business use and offset against tax accordingly.

When thinking about applying for a secured homeowner loan, it is wide to consult with a professional loan broker who will search the market and source the best secured loan for you from a wide panel of lenders.

A Guide To Getting a Secured Business Loan

Secured business loans or commercial loans are designed for a wide variety of small, medium and startup business needs including the purchase, refinance or growth of a company. Business loans are similar to a commercial mortgage in that funds can be borrowed over an extended period of time, usually a maximum of 25 years, and are secured on the building being purchased.

A business loan can be secured against most types of freehold or long leasehold properties, such as factories, shops, bars, residential care homes, guest houses, restaurants, office buildings, industrial units, blocks of flats and more. A business loan can also be secured against a residential property. The lending criteria is very similar to that of a commercial mortgage except that the general maximum that can be borrowed is 60% of the assessed Market Value. However, a few lenders will advance up to 75% depending upon the deal and the security available. Interest rates on the business loan are variable and depend upon the credit history of the borrower and the length of the term.

These percentages are known as the Loan-to-Value ratio, or LTV. The lower the LTV, the lower the risk is to the lender. The higher the LTV, the more the risk to the lender and it is probable that a higher interest rate would be levied. Lenders will not usually advance above 75% LTV to try to make sure that there would be enough security in the case of a quick sale, often via an auction house when it is expected that property will sell at a discounted rate of up to 25% below the regular market value.

Commercial Mortgages for UK Businesses

A commercial mortgage is similar to a residential mortgage in that funds can be borrowed over a long period of time, usually a maximum of 30 years, secured by a first charge on the property being bought.

In taking first charge, the lender is first in the queue to recover any debt if the property ever needs to be sold. This could happen because the mortgagee wishes to move on and sells, or perhaps has defaulted on the repayments causing the lender to foreclose.

If a first charge business mortgage already exists, it is common for different lenders to advance money secured by way of a second charge which puts that lender as second in the ‘security queue’.

Unlike residential mortgages, nearly all commercial mortgages are variable rate loans which fluctuate in line with the Base Rate set by the Bank of England’s Monetary Policy Committee. So, if a mortgage lender offers terms which include an interest rate of say ’2% over base’ then a base rate of 4.5% would result in an interest rate of 6.5% being applied to the loan.

Some lenders will link their interest rates to LIBOR, which is the London Inter Bank Offered Rate. LIBOR is published daily in the Financial Times and can be found on a variety of other financial websites.

Commercial Mortgages can be secured against all kinds of freehold or long leasehold properties, such as shops, pubs, care homes, restaurants, office buildings, industrial factory units and more. Applying for a commercial mortgage is very much like that of a residential mortgage except that the maximum that can be borrowed is 60% of the assessed Market Value, although one or two lenders will advancelend up to 75% depending upon the proposal.

These percentages are known as the Loan-to-Value ratio, or LTV. A lower LTV means that the risk to the lender is reduced. The higher the LTV, the greater the risk to the lender and it is likely that a higher interest rate would be charged.

Lenders will not generally advance above 75% LTV to ensure that there would be enough security in the case of a forced sale, perhaps through auction when it is expected that property will sell at a discounted rate. When looking for a commercial mortgage it is advisable to shop around for the best deals and to use a specialist commercial finance broker who will possess the necessary specialist knowledge to advise you accordingly.