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Posts tagged with: mortgages

When Are Secured Loans Better Than Remortgaging?

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Remortgaging can be an effective way of borrowing significant sums of money against the value of your home. However, there are instances in which it may be worth considering a secured loan as a more accessible and cost-effective alternative.

What are secured loans?

Any loan that is issued against the value of an asset of any kind is considered a secured loan. The most obvious example of which being a mortgage, which is secured against the value of the borrower’s property.

Depending on the size, nature and intention for the loan, interest rates and overall borrowing costs can vary wildly. Nevertheless, there are several instances where opting for a secured loan could prove beneficial.

Examples of which include:

When the money is needed as quickly as possible

One of the inherent disadvantages of mortgage and remortgage products in general is the time and effort it takes to organise them. Depending on the type of secured loan you choose, it’s possible to get your hands on the money you need in a matter of days. Bridging loans in particular are incredibly quick to organise for those who qualify.

When you have limited or no proof of income

There are various specialist secured lending products available that don’t take into account the applicant’s proof of income. Instead, it’s simply a case of providing the necessary collateral to cover the cost of the loan. Again, bridging finance is an example of a secured loan that can be accessed with little to no proof of income required. Often easier to obtain and more cost-effective than a remortgage.

When you have an imperfect credit score

A strong credit history is typically a prerequisite with the vast majority of traditional mortgage lenders.  Hence, you’ll be counted out of the running if you have a less than perfect credit score. As with proof of income, it’s not always necessary to undergo a credit check to qualify for a secured loan. Specialist lenders focus exclusively on collateral and security, rather than the technicalities of the more traditional loan application.

When you need to access a larger amount of money

It’s not unusual for mortgage and remortgage products to be relatively limited in terms of loan-to-value percentages. You may be able to borrow up to say 60% of your property’s value, but no more. Depending on the type of secured funding solution you choose, it may be possible to tap into up to 95% of your property’s value. A good credit history and proof of income can help increase the amount you’re able to borrow, which may also be affected by the nature of the property used to secure the loan.

When you’d prefer more flexible repayment options

Last but not least, specialist secured loans open the door to a limitless range of flexible repayment options. If it suits your needs, short-term secured funding could be repaid in full in a matter of months to minimise borrowing costs. Rather than being tied to the terms and conditions set out by the lender, there’s far more flexibility with a specialist secured loan.

With such an array of options available, it’s important to seek independent financial advice before making your final decision.

(This article was provided by iConquer)


My Plan to Save Up to Buy a House

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By Jenna Brown

One of the worst parts about being in debt is the feeling I get that I’ll never have a place of my own. Home ownership is a big decision. I know that. In fact, it’s been a decision that I’ve steered clear of for most of my adult life. As a renter, a big chunk of my utilities are included in my rent. As a renter, when something breaks I just call my landlord and viola! It gets fixed. As a renter, I can pick up and move to wherever I want (with thirty days notice, of course). I’m not tied to any one place and I don’t have to worry that my living space will be threatened if the economy tanks again.

Still, home ownership is a boon in so many ways. It adds a level of stability to my life that has been missing. It would be nice to know that, zoning laws notwithstanding, if I want to change something in my home I can: I can paint. I can knock out or build in walls. I can add space. I can make it absolutely my own instead of having to find creative ways to dress up a rental space. Plus, owning a home makes me look better and more reliable on paper. Finally, being a homeowner would qualify me for a bunch of tax breaks that are mere pipe dreams as a renter.

Of course, buying a home isn’t easy. Houses are incredibly expensive (unless I want to buy in Detroit and, no offense to the Motor City, that’s not in the cards right now). Buying a home means saving enough to be able to fork over at least 20% of a seller’s asking price up front. That is a lot of money to save, especially since I’m still paying down my debt and building up my emergency funds, retirement accounts and savings accounts. Then, there’s finding a mortgage lender who will actually approve my application. It’s a lot, to say the least.

Still, I have a plan. It might be a “Pie in the Sky” type of plan, but it’s better than nothing. Here it is:

Figuring Out the Timeline: There is no way I am going to be able to save up 20%, pay down enough debt to make me stop looking risky to mortgage lenders and be ready to move any time soon. So, instead, I’ve decided that I don’t even want to start looking for homes or mortgages until 2022 or 2023.

Why So Far Out? I have debts and several accounts I’m trying to build. My long term goals will not allow me to totally eschew those accounts and debts in favor of saving for a home. Giving myself seven to eight years to save lets me accomplish all of those goals simultaneously. Plus, it takes an average of seven years for bad marks on a credit history to fall off. Most of mine have an average of three years left on them before they disappear. If I keep paying down my debt and don’t rack up any new bad marks, I’ll have four years of totally positive credit history to build on as well as three years of diligent and positive payment histories working to my benefit. Mortgage lenders will be able to see that I work on my debts before taking on new ones and that I know how to manage my credit and payment plans.

Finding Breaks & Deals: Did you know that there are tons of different programs out there that make it easier for first time home buyers to purchase their first homes? It’s one of the areas I have been researching. At office of Housing and Urban Development, for example, has programs that help reduce the closing costs and down payment amounts through grants or very low cost loans. If you have served in the military, Low VA Rates says your veteran’s benefits entitle you to lower mortgage rates than civilians will get. I didn’t serve and I’m not sure my income will qualify me for a HUD loan but there are other programs through banks, credit unions and nonprofits that can help a single lady like me make sense of the system and reduce my costs. I plan on exploring all of them and taking advantage of every break I can get.

Figuring Out My Priorities: I know that I do not want to leave my current city. I’m totally fine with the idea of putting down roots here and really committing to this place. I’m not sure, though, which neighborhood I most want to live in long term. I love where I live now, but buying space here is expensive and primarily condominium-based. I’m not sure I always want to share walls with other people. Another factor is future kids. I know that if I have kids I want them to go to a great school and that means committing to a neighborhood in those school districts. I also want to be able to have enough space to accommodate guests.

You’ll notice that I didn’t really break these categories down into specific numbers. This is because it is important for me to be flexible when I’m putting together a long term plan. I know what I can afford now, but who knows what the market will be like when I’m ready to buy. So, instead, I’m hoping that by keeping it loose and focusing on my current goals and doing my ground work now, when I’m ready to buy, the process won’t be as shocking as it has been for my friends and family. Wish me luck!