Secured Loans

Mortgage Secured Loan

A mortgage secured loan is a product which allows people in the UK to secure the home they want to settle down in, before they can afford to purchase it outright. There are very few people in Britain who wish to rent accommodation for their entire lives. For most, the ambition is to own your own home, whether you decide to live in it with a family or otherwise. Yet, with the ever increasing cost of property few people can afford to buy a home they want to spend the rest of their lives in when they come to the age they want to settle down.

A mortgage secured loan allows them to do this. Mortgage providers forward borrowers a large amount of capital with which they can purchase and move into the home they wish to live in. Once this is done they begin repaying their secured loan lender on a month to month basis. Once the entire capital sum, plus interest, has been paid off the home is now the property of the borrower. This allows the home buyer to live in their dream home today, instead of waiting years and years to save up its value.

A mortgage is known as a secured loan because it is asset backed. This means that should you default on your repayments the lender of your mortgage secured loan is liable to seize the property. As this, obviously, presents a pretty heavy risk, you do not want to enter into a mortgage agreement without first considering how the process works. This guide to secured home loan products in the UK will take you through the most important factors of your mortgage secured loan, allowing you to begin your search for a lender with all the relevant knowledge in hand.

Preparing for your Mortgage

While some lenders are prepared to offer some borrowers secured loan products without any kind of deposit or credit check they are becoming increasingly rare. This is, overall, for the best. Entering into a mortgage secured loan without being able to show you have the means and ability to handle a lending product of this size and risk is inadvisable for both the lender and borrower. Therefore, the vast majority of companies will run a credit check and expect a sizeable deposit from any applicant. How large this deposit is will vary depending on the company you go to and the property you wish to purchase but it is likely to require a fair amount of saving to accumulate.

Most deposits are 25% of the property value, so for a buyer looking to purchase a 200,000 pound home, you will need a 50,000 pound deposit to secure your mortgage secured loan. Once you have built this up you can begin to look at the kind of mortgage products that your lender can offer someone in your position. Your credit and borrowing history will come into play here, as will your financial status, but here are some of the universal factors every borrower must consider.

Payment Types

The two main forms of mortgage repayment methods are repayment mortgages and interest only mortgages. Depending on your financial situation and future prospects either may suit. Repayment mortgages are the most popular as they offer you a pretty straightforward approach to your payment plan - you repay a set amount each month, plus the agreed percentage of interest. Interest only products, on the other hand, requires you to simply pay off the amount of interest each month until you the end of term, when you repay the capital sum. Both secured loan products have their own advantages and disadvantages, so you need to consider which is most workable in your budget.

Interest Types

You might say that the interest rate on your mortgage secured loan is the most crucial figure of all as it, essentially, represents the price tag. This is how much extra you will be paying for the capital you were initially forwarded and, like payment types, you have a choice as to how you wish to do this. The most common is standard variable rate, which allows you to pay off your secured loan at the lenders standard rate which may increase or decrease along with the company's performance. For more consistency you may want a fixed rate of interest, which is generally higher than standard but guaranteed to remain static for an agreed period.

A mortgage secured loan is the way most home buyers in the UK now buy their property. Though it can be a great product, it also comes with a lot of risks and you need to keep this in mind when searching for your lender. Finding the best mortgage secured loan for you means considering your budget and your future plans.