Secured Loans

Secured Mortgage Loans

Secured mortgage loans are one of the most popular types of credit products on the market in the UK. Due to the high cost of housing most people decide they wish to settle down before they have the financial ability to purchase the home they wish to live in outright. In order to gain this ability people often obtain online secured loans or borrow mortgage loans which offer them the capital to purchase the home they want. The loan itself is secured against the property that is being purchased which means the borrower can move into the property, live in it as their own but must repay the lender each month until the overall debt is cleared.

Once this happens the house is now theirs and their secured mortgage loans payment is finished. If, however, they default on the payments, the lender has the right to seize the property. This is the risk you run with secured mortgage loans and you need to be aware of it when you take out a product. This guide will give you all the information you need to know about how these products work. Keep these factors in mind when you apply for secured mortgage loans.

The Payment Types

Mortgage products come with a variety of options, one of which is the type of payment method you use to clear the debt. There are two main ways you can decide to do this - either with an interest only or repayment mortgage scheme. Repayment loans are paid off with monthly payments comprising of a percentage of the overall capital, plus an amount of interest. This is the most popular option for methods of repayment - it is generally seen as a steady, consistent and easily predictable way to clear the debt. Interest only secured loans, however, offer a different prospect.

Interest only secured mortgage loans allow the borrower to pay back just the interest accrued each month on the product. At the end of the secured mortgage loans term, the total capital amount is then paid to finally release the home to the borrower. This might be a better option for those whose career prospects are likely to improve hugely over the term of the mortgage or those who are purchasing the house as an investment and wish to pay off their loans with the cash they make off it. Of course, this is a gamble as changes in the housing market can find you with a less valuable property at the end of the term than at the start.

The Interest Rates

Perhaps the most important decision of all when you have secured your loan with a property is the interest rate which you apply to the deal. There are two main interest rates on the UK market - the standard variable rate and the fixed rate. Standard variable is generally more popular as it attaches you interest to the lender's own standard rate. This will go up and down with the performance of the company but is usually trackable and consistent, so long as your lender doesn't get into trouble.

Fixed rate guarantees to keep the interest percentage at an agreed level for a set amount of time. This will usually be slightly above the standard rate of the company but, since it is guaranteed to stay there, it gives the borrower more scope to budget for the first few payments. Also it means that, should your lender get into trouble, the secured loans you have with them will not rise in price. It does however means that should the standard rate go down, you may find yourself paying way above the odds for your mortgage.

The Term

The vast majority of secured mortgage loans come with a twenty five year term of repayment. This means you payments are scheduled each month for that period of time after which you own the home which secured the agreement. Some UK borrowers prefer to set their deal for a shorter or longer length of time, both of which have benefits and disadvantages. A shorter term means less time spent in debt and a lower overall spend on payments but more pressure and higher individual monthly payments. A longer term means smaller monthly deposits and often times less problematic interest rates but usually results in paying a larger amount overall and could keep you in heavy debt well into your old age.

Deciding on the details of your secured mortgage loans is essential to getting the most from the product. Secured loans can be used for a number of things and a mortgage is a great example. You need to choose these items carefully, however, and be sure that they suit your budget and career prospects. Secured mortgage loans are some of the most important products you will purchase.