How do Secured Loans work?

Secured Loans, also known as a Second Charge Mortgage, are only used when other options have been exhausted. They are generally used for applicants who cannot or choose not, to apply for a normal First Charge Mortgage.

Now Secured loans are far more common amongst homeowners and homebuyers, as the rates on offer are much lower than those that were previously available.

What are my options?

When it comes to raising additional funds against your property, there are three main options for you to choose from:

  1. A further advance from your current lender.
  2. Remortgage to a new Lender.
  3. Second Charge mortgage.

If you are only looking to borrow a low amount, unsecured loans can also be a possible option. If you choose to opt-in for a second mortgage, your current existing mortgage will carry on as normal with your current lender, and the extra funds will be with a different provider.

The second mortgage works based on a different rate of interest with its own direct debit. Some people choose to run their second charge loan over the same term as their main mortgage, in order to keep the payments a bit lower.

Raising Additional Funds

There are many reasons why people raise additional funds to secure against their property. These may include, but are not limited to:

  • Home improvements.
  • Debt consolidation.
  • Purchasing cars or other vehicles.
  • School fees.
  • Tax bills.
  • Cosmetic surgery.
  • To pay for a wedding/honeymoon/special anniversary/holiday.
  • Injecting cash into businesses.

Why not Just Advance or Remortgage?

Here are reasons as to why a Second Charge Mortgage could possibly be a better option for you than a Further Advance or Remortgage:

  • Looking to retain your current mortgage if it has a lower rate of interest.
  • To maintain your existing mortgage because it’s interesting only and that’s how you prefer it.
  • Since your last mortgage you have gone self employed in Leeds.
  • Your income may be derived from multiple sources.
  • You’re in need of quickly raised funds.
  • Looking to raise capital against your UK property to purchase a foreign property.
  • Prefer to avoid all setting up costs you may receive upfront.
  • Your current mortgage lender has declined your further advance application.
  • Your credit score could be poor and you feel it best to avoid a remortgage in Leeds due to substantial redemption penalties on your existing mortgage deal.
  • Wanting to raise funds to pay a tax bill.
  • You want to raise funds to purchase another property which isn’t currently suitable for a mortgage (non-standard construction/property in poor repair).
  • To inject cash into a new or pre-existing business.
  • You need capital to pay business tax liabilities or to clear a business overdraft.

Applying for a Secured Loan in Leeds

When you choose to work with a Mortgage Broker in Leeds, a broker fee and an additional arrangement fee usually are required to be paid for the services. You can choose to pay upfront or opt to add them onto the loan.

Remember, however, that adding additional costs to the mortgage means you would be required to pay extra on interest. This means that if you extend the term of any debts you are considering consolidating, you will be paying back more interest.

If you are securing any currently unsecured debts, you are putting your home at risk if you do not keep up the repayments. For more information on this, please get in touch with a mortgage advisor in Leeds and we’ll book you in for a free mortgage consultation.

Date Last Edited: December 6, 2023