Most such schemes work on the basis that the lender will provide the homeowner a monthly income or a lump sum provided there is sufficient equity in the property and you continue to reside in the home. Upon the homeowner's death or if you sell your property to move into a nursing home, the loan company will recover its share or all of the property. Although not guaranteed, the Home Equity Release Loan Company will usually benefit provided you live to your expected life expectancy because of the rising housing market.
As with any home equity schemes, there are advantages, disadvantages and of course other alternatives to consider. The main disadvantages are that it is unlikely that your family will benefit from any inheritance, any partner would be forced to find alternative accommodation and there is the possibility of losing applicable means tested benefits.
Wednesday, October 14, 2009
A guide to buy to let loans
In the last decade or so an increasing number of homeowners have purchased properties to let out. Why? There are many reasons, namely, another source of income, investment, to establish a property portfolio and so on.
Many lenders and mortgage companies have raced to bring out new products or relax lending policies in order to service the buy to let sector of lending. The most popular method of securing a loan is to apply for a buy to let mortgage against the property to be purchased. Depending on the lenders borrowing policy, the applicant is usually required to contribute a deposit of between 5% and 20% and prove that the rental income exceeds the mortgage repayments. In addition a valuation survey is normally required and the homeowner must pass all of the statutory checks made by the lender including any applicable bad credit history and residency information.
An alternative method of funding a buy to let project used by some homeowners is to release equity in their current property by applying for either a secured loan or re-mortgaging. This option is only applicable provided the homeowner has sufficient equity in the house and can demonstrate sufficient income to pay the higher mortgage or secured loan repayments.
The last option is only available to those lucky few who have sufficient savings to invest and do not need to borrow capital. Always consult an independent Financial Advisor regulated by the Financial Services Authority for further information on financing any buy to let scheme.
Many lenders and mortgage companies have raced to bring out new products or relax lending policies in order to service the buy to let sector of lending. The most popular method of securing a loan is to apply for a buy to let mortgage against the property to be purchased. Depending on the lenders borrowing policy, the applicant is usually required to contribute a deposit of between 5% and 20% and prove that the rental income exceeds the mortgage repayments. In addition a valuation survey is normally required and the homeowner must pass all of the statutory checks made by the lender including any applicable bad credit history and residency information.
An alternative method of funding a buy to let project used by some homeowners is to release equity in their current property by applying for either a secured loan or re-mortgaging. This option is only applicable provided the homeowner has sufficient equity in the house and can demonstrate sufficient income to pay the higher mortgage or secured loan repayments.
The last option is only available to those lucky few who have sufficient savings to invest and do not need to borrow capital. Always consult an independent Financial Advisor regulated by the Financial Services Authority for further information on financing any buy to let scheme.
A guide to homeowner loans
Although the housing market has slowed in the UK in recent years some areas continue to beat the trend, meaning, those fortunate enough to live in those areas are benefiting from growing equity in their home. This is potentially good news for companies who specialise in homeowner loans because there is an opportunity to sell secured loans to consumers wishing to borrow against their home. It is worth remembering however, that if house prices fall, there is a danger that the equity in the home falls, in some instances a negative equity situation can arise, for example the loans secured on the home are greater than the value.
For those wishing to apply for a homeowner loan, the company or broker concerned will typically ask questions such as are you a homeowner?, have you held a mortgage? Employment status and annual household income. Depending on the lender it is likely a credit history check maybe performed with further questions regarding any bad credit problems.
Homeowner loans that are secured on fixed assets such as property are generally cheaper in terms of interest rate APR’s charged compared to unsecured personal loans, however, the loan is secured on your property which means if you default, your home is at risk and could be repossessed.
For those wishing to apply for a homeowner loan, the company or broker concerned will typically ask questions such as are you a homeowner?, have you held a mortgage? Employment status and annual household income. Depending on the lender it is likely a credit history check maybe performed with further questions regarding any bad credit problems.
Homeowner loans that are secured on fixed assets such as property are generally cheaper in terms of interest rate APR’s charged compared to unsecured personal loans, however, the loan is secured on your property which means if you default, your home is at risk and could be repossessed.
A Guide to secured personal loans
Lenders are finding new ways of soliciting loans to the general public. Marketing communications containing the words “Personal Loan” is a phrase often used. So what does this actually mean? In general terms most personal loans are regarded as unsecured i.e. no fixed assets are required to apply.
The borrowing amounts are generally smaller than secured loans and are sometimes used to buy luxury items such as holidays, cars, boats or for home improvements or even debt consolidation. The loan company or broker will assess an application on its merits in line with its lending policy. This usually means the prospective customer income, credit history, current outgoings, the amount required and most important the ability to repay the debt in full are assessed.
Some personal loans however are actually secured and are marketed by those companies who wish to lend amounts to those who maybe ineligible for an unsecured loans or consumers who are looking for the lowest Annual Percentage Rate (APR) interest rates. There is a perception that secured personal loan interest rates are lower because the lender is taking less of a risk. Always be aware that a secured loan is where a fixed asset such as a homeowner's property is used to guarantee the debt. Your home of course is at risk if you do not keep up repayments.
The borrowing amounts are generally smaller than secured loans and are sometimes used to buy luxury items such as holidays, cars, boats or for home improvements or even debt consolidation. The loan company or broker will assess an application on its merits in line with its lending policy. This usually means the prospective customer income, credit history, current outgoings, the amount required and most important the ability to repay the debt in full are assessed.
Some personal loans however are actually secured and are marketed by those companies who wish to lend amounts to those who maybe ineligible for an unsecured loans or consumers who are looking for the lowest Annual Percentage Rate (APR) interest rates. There is a perception that secured personal loan interest rates are lower because the lender is taking less of a risk. Always be aware that a secured loan is where a fixed asset such as a homeowner's property is used to guarantee the debt. Your home of course is at risk if you do not keep up repayments.
A Guide to secured personal loans
Lenders are finding new ways of soliciting loans to the general public. Marketing communications containing the words “Personal Loan” is a phrase often used. So what does this actually mean? In general terms most personal loans are regarded as unsecured i.e. no fixed assets are required to apply.
The borrowing amounts are generally smaller than secured loans and are sometimes used to buy luxury items such as holidays, cars, boats or for home improvements or even debt consolidation. The loan company or broker will assess an application on its merits in line with its lending policy. This usually means the prospective customer income, credit history, current outgoings, the amount required and most important the ability to repay the debt in full are assessed.
Some personal loans however are actually secured and are marketed by those companies who wish to lend amounts to those who maybe ineligible for an unsecured loans or consumers who are looking for the lowest Annual Percentage Rate (APR) interest rates. There is a perception that secured personal loan interest rates are lower because the lender is taking less of a risk. Always be aware that a secured loan is where a fixed asset such as a homeowner's property is used to guarantee the debt. Your home of course is at risk if you do not keep up repayments.
The borrowing amounts are generally smaller than secured loans and are sometimes used to buy luxury items such as holidays, cars, boats or for home improvements or even debt consolidation. The loan company or broker will assess an application on its merits in line with its lending policy. This usually means the prospective customer income, credit history, current outgoings, the amount required and most important the ability to repay the debt in full are assessed.
Some personal loans however are actually secured and are marketed by those companies who wish to lend amounts to those who maybe ineligible for an unsecured loans or consumers who are looking for the lowest Annual Percentage Rate (APR) interest rates. There is a perception that secured personal loan interest rates are lower because the lender is taking less of a risk. Always be aware that a secured loan is where a fixed asset such as a homeowner's property is used to guarantee the debt. Your home of course is at risk if you do not keep up repayments.
A guide to applying for a secured loan
Unlike personal loans a secured option is available to homeowners who own a property or other fixed asset. This type of loan is generally easier to obtain from lenders who specialise in this area because there is security for the lender in the scenario that the homeowner defaults on paying the repayments at a later date.
There are of course advantages of taking out a secured loan compared to the unsecured option such as a lower interest rate and longer repayment periods. However, it must be stressed that every loan application is assessed on it own merits according to the lenders borrowing policies.
The main disadvantage of secured loans is that this type of borrowing is secured against your home or other fixed asset. Therefore, if you are unable to keep up the monthly repayments your home maybe at risk. Some lenders also impose penalty charges if you repay the debt early, which in some cases can be expensive.
There are of course advantages of taking out a secured loan compared to the unsecured option such as a lower interest rate and longer repayment periods. However, it must be stressed that every loan application is assessed on it own merits according to the lenders borrowing policies.
The main disadvantage of secured loans is that this type of borrowing is secured against your home or other fixed asset. Therefore, if you are unable to keep up the monthly repayments your home maybe at risk. Some lenders also impose penalty charges if you repay the debt early, which in some cases can be expensive.
Secured Loan Calculator
Feel free to use our interactive secured loan calculator. Before deciding to apply for a loan some homeowners find it useful to understand the approximate cost of borrowing in terms of the monthly cost and the interest which is being charged. This is especially useful for homeowners who work to a monthly budget by knowing what their outgoings are such as household bills and mortgage payments versus income received.
To use the loan calculator simply enter the amount you wish to borrow and select a repayment period using the drop down menu. Then enter the interest rate and press the calculate button. The results are calculated using the generic compound interest formulae and show the monthly repayment and the monthly interest charged by the lender. For comparison purposes, which some find useful, an alternative monthly repayment figure is displayed below assuming an interest rate of 5.5% is charged.
Remember, this online calculator tool should be used as a guide only and some lenders will often build in Payment Protection Insurance or (PPI) in addition to possible secured loan application fees. Therefore, the actual monthly repayment amount in reality could be higher.
http://www.expertloanquote.co.uk/loan-calculator.html
To use the loan calculator simply enter the amount you wish to borrow and select a repayment period using the drop down menu. Then enter the interest rate and press the calculate button. The results are calculated using the generic compound interest formulae and show the monthly repayment and the monthly interest charged by the lender. For comparison purposes, which some find useful, an alternative monthly repayment figure is displayed below assuming an interest rate of 5.5% is charged.
Remember, this online calculator tool should be used as a guide only and some lenders will often build in Payment Protection Insurance or (PPI) in addition to possible secured loan application fees. Therefore, the actual monthly repayment amount in reality could be higher.
http://www.expertloanquote.co.uk/loan-calculator.html
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