Secured loans for Investment Property

The secured loan can be a very fast solution to raising money on an investment property if it contains sufficient equity to provide security. Secured loans are usually treated as second charges to mortgages on a particular investment property. They are considered by investors to be a fast and easy way to raise capital quickly in an emergency or to meet a short term financial problem. This convenience usually costs a bit more but can be useful where an investors credit history is not perfect. Loan values tend to start from about £10,000 and can reach quite large sums.

Uses of a secured loan

  • Property upgrading – Upgrading a property where funds are not readily available but where the investor has sufficient equity contained in the investment property to cover the loan.
  • Protect your mortgage – If the investment property is mortgaged and to re-mortgage would result in early repayment charges to the lender, a secured loan could provide a good solution.
  • Credit problems – if your credit rating has temporarily reduced your ability to re-mortgage your property, a secured loan may help overcome the immediate problem.
  • Short term secured loans – perhaps your current investment mortgage has 20 years to run and re-mortgaging would prove expensive in interest repayments over that time, a short term secured loan could provide a solution.

Lending requirements for secured loans

Secured loan lenders will require you to meet their criteria requirements and these will vary slightly between lenders. The lender will check your credit history and your credit rating will be used to decide if you are considered to be a good risk. You still might qualify even if your credit rating isn’t perfect as secured loans are primarily secured against the equity in your property.

Things to consider before applying for a secured loan

Taking out a secured loan is a financial decision that should not be taken lightly.

  • Financial risk – As your investment property will be the security vehicle for the loan, should you fail to make the payments your property could be forfeit.
  • Paying off the secured loan early – Some lenders may charge for early repayment so if this is your intention, check the terms of the loan.
  • Multiple secured loan applications – avoid making multiple secured loan applications as this will lower your credit rating.
  • Secured loan term – secured loans terms may repaid over five to twenty five years but as interest rates are likely to be higher than mortgages, long repayment terms should be avoided.