Second Mortgage Loans
Posted by admin on December 8th, 2011 filed in Mortgage
Mortgages can seem complicated enough for first-time buyers, so the concept of a second mortgage can prove too much for some homeowners. First or second mortgages, however, are in no way difficult to understand; only the terms imposed on mortgages are complex, describing trackers, interest-only options and fixed or variable rate repayments. Provided below is a guide to second mortgages, explaining what they are and how they work.
What is a Second Mortgage?
A second mortgage is essentially a loan that has been secured on the applicant`s property. Loans are available in two varieties: secured and unsecured. An unsecured loan is one that does not expressly use the borrower`s home as security for the debt. A secured loan is one that does use the home as security; thus, a borrower could lose his home if he defaults on a secured loan (in fact, he could still lose his home if he defaults on unsecured loan repayments and the lender successfully applies for a charging order on his property).
The way in which a second mortgage works is somewhat different from that of a traditional secured loan. A second mortgage deals with the equity available in a property, which is why it is sometimes referred to as a home equity loan. Equity is the value of a property less any existing debt; for example, a home valued at £250,000 yields equity of £175,000 if the homeowner has a first mortgage worth £75,000. In this example, the homeowner could apply for a second mortgage up to £175,000.
Why Apply for a Second Mortgage?
Applying for a second mortgage is not a decision that ought to be taken lightly. Releasing more equity from a property in return for increased debt can prove disastrous if the borrower does not understand the process or if he simply cannot afford repayments. As with any type of secured finance, the borrower risks losing his home if he defaults on repayments for a second mortgage.
The obvious reason why homeowners apply for a second mortgage is to raise a lump sum of cash. In the above example, the homeowner could be granted up to £175,000 for a second mortgage, which is enough to pay for all manner of expenses.
Typical uses for a second mortgage include paying for property repairs or making home improvements, such as installing an extension, converting a loft or fitting solar panels on the roof (at an average cost of around £15,000 on large properties). A second mortgage could also be used to pay off student fees or existing debts, while it is not uncommon for applicants to release equity in their homes to pay for a new car or holiday. One of the most common reasons for applying for a second mortgage is to finance the purchase of a second property, an especially viable option at the moment considering the low base rate and falling house prices.
Remortgage or Second Mortgage?
Some people confuse second mortgages with the process of remortgaging a property. A second mortgage is different from a remortgage, however, which occurs when the borrower switches mortgage lenders (a process that often involves releasing more equity). A second mortgage is a type of loan that is distinct from the first mortgage; indeed, repayments for a second mortgage will usually be charged separately from those of the first mortgage.
Any form of borrowing requires the applicant to consider his position very carefully before proceeding with an application. This is especially true of second mortgage loans, which are secured against the borrower`s home and invariably involve large sums of money. Comparing the market with Moneysupermarket to identify the best rates for second mortgages is a vitally important step before applying for a home equity loan.
Secured vs Unsecured Loans
Posted by admin on December 6th, 2011 filed in Loans
The difference between an unsecured loan and a secured loan ought to be obvious, but the two types of finance are not as dissimilar as some people might assume.
An unsecured loan is typically defined as a type of finance that does not require the borrower to provide security for the debt. In the vast majority of consumer credit agreements, the borrower`s home is counted as security. Thus, a person who applies for an unsecured loan does so without explicitly providing his home as security for the debt.
A secured loan is obviously a type of finance for which the borrower has provided his home as security for the debt. As mentioned above, while these two types of finance seem very different, in practice this is not always the case.
The advantage of choosing a secured loan is usually one of cost. Security does not constitute security for the borrower (quite the opposite, in fact), but instead protects the lender`s investment should the borrower default on repayments. Offering security for a loan is advantageous in so far as the lender is, in most cases at least, able to offer relatively low rates of interest. This is possible because the security provided by the borrower has reduced the risk associated with the debt; after all, if the borrower defaults, the lender can instigate proceedings to repossess (or force the sale of) his home.
One other advantage of a secured loan is that larger sums of finance are usually available to the borrower. Secured loans of between £3,000 and £100,000 are not uncommon even in today`s economy, but just because a loan is secured does not mean that acceptance is guaranteed; loan applicants must still be able to demonstrate (e.g., through credit scoring) that they are capable of repaying the loan as agreed.
Unsecured loans, therefore, are invariably smaller in sum and higher in cost. Lenders do not explicitly demand security for loans in the form of property, so the risk of providing finance is substantially higher. The increased risk results in higher interest rates, which inflate the total sum of the loan to be repaid. It is not uncommon for a person who borrows £5,000 through an unsecured loan to pay hundreds of pounds more in interest compared to a person who borrows the same amount through a secured loan.
The provision of finance for unsecured loans is also much lower. Although unsecured loans for £100,000 or more are sometimes advertised, they are only very rarely granted; the majority of unsecured loans are for relatively small sums of cash, usually under £10,000 in value. The main advantage of an unsecured loan is that the borrower does not risk losing his home should he default on repayments. Or does he?
A little-known provision of the law allows some lenders to apply to the court for a charging order, which has the effect of converting an unsecured debt into one that is, for all intents and purposes, secured. The charging order, which allows lenders to force the same of a home, can be made if a homeowner defaults on repayments for an unsecured loan. Although used only rarely by lenders, the threat of a charging order is sufficient to prompt some applicants to opt for secured loans.
Whatever type of finance is sought, a loans calculator should be used to determine precisely how much money the applicant can borrow by working out how much money he can comfortably repay. Ensuring that repayments are made in full and on time without exception is the only to way to guarantee that a borrower`s home will not be repossessed.
Bad Credit Loan – How To Secure Yours
Posted by admin on July 19th, 2011 filed in Loans
Even if your credit rating is good, there is a reasonable chance that at some point in your life you may need the help of a bad credit loan. If on the other hand your current credit history is poor and you feel you are unlikely to be able to secure finance, think again.
There are a wide number of banks and financial institutions that specialize in lending money to people with poor credit. However generally there are a number of factors that you should consider before taking the plunge with a bad credit personal loan of this type.
- Interest Rates Because of the perceived higher risk of lending people with a poor credit history, the interest rates charged are likely to be higher than those offered to customers with a prime credit history.
- Credit Report it’s often worth checking your own credit history with one of the online credit report agencies to check your current status and to check for any possible mistakes on your report.
- Improve Your Credit Rating it is a good idea to try and improve your credit score by paying bills on time every time. Another way of improving your credit is by being added as a joint account holder of someone else’s credit card.
- Am I Getting A Good Deal? In desperation to secure credit many consumers will grab the first deal offered to them, which can be a mistake. There are many companies offering these types of bad credit personal loans and its worth shopping around to get the best deal.
Not everyone who requires a poor credit loan and has a bad credit history is financially unstable. Many people have had a few financial problems in the past but things have improved recently however their poor credit history continues to follow them around. However whatever your situation you should always borrow no more than you can easily afford to repay the loan. Work out a budget and bear in mind that interest rates are often variable and can go up as well as down.
Personal Loans – A Simple Guide
Posted by admin on July 19th, 2011 filed in Loans
A lot of Individuals at a certain stage in their adult life want to be lent cash. Of the vast assortments of ways to get your hands on some form of finance the majority people might look at a loan. A personal bank loan is used to refer to general purpose finance secured for a person to exploit as an alternative to a commercial business. Nevertheless it does not describe a home loan or mortgage which is made use of for the purchase of a domestic residence.
Personal loans may be made use of for a large assortment of functions and normally the bank loan vendor would not be bothered with what exactly you plan to exploit the personal loan for. They really are merely bothered that a person has the ability to settle up the personal loan within the appointed duration. Specialized borrowing products are also accessible, like motor vehicle and property or home improvement borrowing products which are anticipated to be drawn on for the specific intention.
Personal Loans perform on the principal that you be in agreement with the conditions of your personal loan which include the interest fee and funding period and from this the monthly repayment amount will be calculated.
Apart from this detail virtually all personal loans operate in pretty much the same approach. The borrower applies for the bank loan, get hold of your funds after which spend it as you intended. You could then designate a regular payment (typically on a month to month time frame) to your loan provider to pay off the money you originally obtained for the repayment time in your bank loans deal. This instalment should be composed of a quantity of cash that goes to pay off the primary amount of money a person loaned in addition an amount of money that goes towards paying back off the predetermined interest you’ll be charged. In conclusion of your personal bank loan duration you’ll have paid back your original financing and also the loan interest rate employed to ones own specific personal loan.
There are normally two types of personal loan:
- Secured Loan This kind of variety of Personal Loan let’s you to borrow a lot more capital and regularly at a cheaper interest fee. On the other hand the loan is secured against something you possess of value – customarily your own property. These kinds of financial loans are as a rule much less expensive and the finance provider will as a rule be happy to lend a bigger amount. This is simply because should you default and be unable to reimburse the loan, the loan company has the abode as security to regain the funds you were supposed to pay.
- Unsecured Personal Loan These kinds of loans never expect any sort of security from the customer borrowing, nonetheless you can assume to pay out a greater percentage charge on your loan monthly payments. You possibly will also be restrained on the total that you’re permitted to borrow from the loan provider.
If you don’t own your own property then you will ordinarily be restricted to an unsecured loan. Nevertheless if you do own your own property you can expect to be offered the option of either a secured or unsecured personal loan. The preference is yours as to whether or not you are happy to take the chance of putting your abode up as a guarantee to acquire a enhanced offer. A lot of persons are all set to do this to acquire a cheap repayment interest charge and to have a loan of the total amount expected. Nevertheless as mentioned the pick is down to you.
It really is intelligent to expend some time determining the amount you could pay back without difficulty, particularly when bearing in mind personal loan interest rates are mostly erratic and may increase as well as decrease; hence it’s imperative to make a note of this when reaching a decision.
When you are thinking about taking out a personal loan it is worth shopping around for the lowest priced deal. There are actually literally hundreds of personal loan vendors on the web and street or it may possibly be worth trying one of the lots of price comparison sites to come across a great bargain.
Auto Finance Facts
Posted by admin on July 19th, 2011 filed in Loans
You have found the car that makes you smile. Now just one thing stands between you and the car you’ve always dreamed of. In a perfect world, you would pay the full price in cash without thinking. But if you are like the seven out of ten of car buyers who do not live in a perfect world, then chances are you would be paying for your car through one of several financing schemes.
Understanding the basics of each car financing option is key to choosing the automobile financing strategy that best suits your situation. Here is an overview of auto financing options that may be available to you.
Auto Loans from Lending Institutions
You can get a car loan from a bank, credit union, or other lending institutions. The car that you purchase will serve as collateral for the auto loan. This means that the lender can repossess your vehicle if you default on the car loan. Auto loans are a popular Auto financing option because they generally offer reasonable interest rates and are relatively easy to get.
Two factors are likely to affect the total cost of the Auto loan. One is, the term or duration of the loan. Generally, the longer the term of the loan, the lower your monthly instalment will be. But you will end up paying more towards interest and this will increase the total cost of the Auto loan. If you can afford it, get a short term loan. Your monthly repayment will be higher, but you will be paying less money over all. Another factor that may affect the total cost of your car loan is your credit rating. Borrowers with a poor credit history are usually charged at a higher interest rate because of the elevated risk.
Home Equity Loans
If you own a home and have accumulated substantial equity on your home, then you may consider getting a home equity line of credit. Home equity loans – sometimes referred to as HEL’s – are fixed or adjustable interest loans that you repay over a predetermined period. Home equity loans are open-ended, adjustable interest loans with a maximum credit limit based on the equity of your home. Most Home equity loans tend to have lower interest rates than credit cards and other types of personal loans. Interest rate payments on home equity loans may also be tax-deductible up to a certain extent. An important warning Home equity loans use your home as collateral against your potential inability to repay the loan, so make sure you are financially capable of repaying the monthly instalments if you do not want to run the risk of losing your home.
Dealer Financing
Like traditional auto loans, Dealer financing is reasonably easy to get. Most dealers have relationships with numerous lending institutions, so they can arrange car loans even for car buyers with blemished credit histories. To compete with traditional bank loans, many dealers offer zero per cent or very low interest on dealer’s loans. However, such loans are available to car buyers with stellar credit. Consumer experts advise auto buyers to get pre-approved on an auto loan from a bank or credit union before approaching the dealers for possible financing. By getting loan pre-approval from another lending institution, an auto buyer gets the upper hand when bargaining for a lower rate on a dealer loan.
Credit Cards
Borrowing from your credit card, also known as a credit card advance can help you to obtain your dream car. Like home equity lines of credit or credit card advances are lines of credit with variable interest rates. To entice existing customers to take advantage of credit card drafts, credit card companies will often waive cash-advance fees, whilst ensuring low rates during the initial period of the loan, or alternatively offer high credit limits. However, because credit card drafts are unsecured, they generally have higher interest rates than the other forms of financing discussed previously such as traditional auto loans, dealer loans or home equity loans. Financing your auto purchase through credit cards could also leave you vulnerable to hefty penalties if you make a late payment or happen to exceed your credit limit.