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Debt consolidation, home improvement

Can I Get a Secured Homeowner Loan with No Mortgage?

Yes. You do not have to have a mortgage to benefit from a secured loan.

A secured loan is normally taken in addition to an existing mortgage. In this case, the mortgage company have the ‘first charge’ on your property (and would be first to be paid out after the property had been sold to pay off your debts) whilst the secured lender has the ‘second charge’.

If you take out a secured loan and you have no mortgage, the difference is that the secured lender would benefit from the ‘first charge’. They would be the first lender to be paid out if your home was sold to clear your debts, rather than having to wait until the mortgage company had been paid first.

If you have no mortgage and are considering a secured loan, you should think carefully about why you are applying for a secured loan rather than a mortgage. If you have no lending secured on your home, a remortgage would generally be your first port of call. In terms of the interest rate you are likely to pay on your borrowing, a mortgage will generally be more beneficial.

However, there are various situations where a secured loan may suit you better than a mortgage.

For example, mortgages can be difficult to agree. Mortgage lenders are becoming ever more choosy about who they lend to. If you are one of Britain’s four million self-employed people then getting agreement for the loan you need can be tough. You may only have been trading for a short time or you may not have three years company accounts.

A secured loan may therefore be a better solution for you as the underwriting requirements for such a loan will generally be less strict. Many loans can be arranged with little or no proof of your earnings.

In addition, you may have a less than perfect credit history. Again, mortgage lenders may be reluctant to agree your loan whereas a secured loan lender is much more comfortable with your application.

A mortgage can also result in significant costs. You may have to pay a valuation and an arrangement fee as well as the legal fees involved in the remortgage. You may also have to commit yourself to a mortgage company for anything between two and five years.

A secured loan, however, typically has far fewer initial fees meaning that the set-up costs are much lower. You are also generally able to repay the loan without significant ‘early repayment charges’, unlike a mortgage.

So, whilst you can take out a secured loan without a mortgage, you should always explore the mortgage possibilities first if you want a loan secured on your home.

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