A secured loan (or second mortgage) is a way of borrowing using a property (often a home) as security. Borrowing can be for personal or business use, and for a several potential uses – we explore these below.
Secured on a borrowers main residence or for personal use…
Loans of this nature tend to be regulated by the Financial Conduct Authority and are sold on a fully advised basis. Common regulated loan purposes include:
Deposit to buy another property
Short term lending to buy a new home before selling existing home.
Clear debt management plans or IVA’s
Holidays and weddings
To fund property purchase for a family member
To inject capital in to a business
It’s more common that the loan purpose is a combination of the above and other purposes.
Secured on a BTL property or “Business Borrowing” secured on main residence…
These loans tend to be non–regulated. You are treated as a business person rather than a consumer. There is less regulatory protection for borrowers and the process is normally less long winded. Rather than being given advice your broker may offer you choices which most closely match your stated requirements so you can choose which you feel suits you best. Common non–regulated loans purposes include:
Second charge loan on a BTL property to raise a deposit to buy another
Portfolio second charge secured against multiple BTL properties
Second and third charge business loans for start up businesses
2 out of 3 borrowers get a lower rate than our representative example of a regulated secured loan below:
Mortgages and Remortgages
£80,000 over 240 months at an APRC OF 4.3% and a discounted variable annual interest rate for two years of 2.12% at £408.99 per month followed by 36 payments of £475.59 and 180 payments of £509.44. The total charge for credit is £39,873 which includes a £995 broker / processing fee and £125 application fee. Total repayable £119,873.
Secured / Second Charge Loans
£63,000 over 228 months at an APRC OF 6.1% and an annual interest rate of 5.39% (Fixed for five years – variable thereafter) would be £463.09 per month, total charge for credit is £42,584.52 which includes a £2,690 broker / processing fee. Total repayable £105,584.52.
£4,000 over 36 months at an APR OF 49.9% (fixed) and an annual interest rate of 49.9% would be £216.21, total charge for credit is £3,783.56. Total repayable £7,783.56.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME
REPAYING YOUR DEBTS OVER A LONGER PERIOD CAN REDUCE YOUR PAYMENTS BUT COULD INCREASE THE TOTAL INTEREST YOU PAY. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
If you have been introduced to Promise Money by a third party / affiliate, Promise may pay them a share of any fees or commission it earns. Written terms available on request. Loans are subject to affordability status and available to UK residents aged 18 or over. Promise Money is a trading style of Promise Solutions Ltd. Promise Solutions is a broker offering products which represent the whole of the specialist second mortgage market and is authorised and regulated by the Financial Conduct Authority – Number 681423.
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