Is it Possible to Get a Secured Loan as a New Home Owner?

As a new home owner, getting a secured loan can be difficult, but it is certainly not impossible. The success of your application will depend on a number of different factors that we examine in this article.

Most people who apply for a loan that is secured on their home have owned their home for at least a couple of years. However, in certain circumstances you may want to avail of a secured loan as a new home owner.

Buying a home will probably be the biggest financial investment you make in your life. However, new homeowners, and especially first time buyers, can find the first year difficult and often find themselves struggling to find funds to decorate or furnish their new home. For this reason, a secured loan on your home can be a great way to raise extra capital.

It is not a decision that should be taken lightly. If you are struggling financially the last thing you need is another loan to put you under even more pressure. And remember that if you fail to keep up with repayments on your secured loan, or your mortgage, you may lose your home. If, however, you are confident that you can keep up with repayments, there is no reason why you should not apply for a secured loan as a new homeowner.

Whether you can borrow, and how much you can borrow, will hinge on a number of factors. Because you are a new home owner, it is unlikely that you will have built up any significant equity on your home, or that you will have paid much off your mortgage. So a lot will depend on the loan to value ratio of your mortgage.

If you borrowed 100 per cent of your home's value in your mortgage your options may be limited. However, you should be able to get a secured loan as many lenders offer these up to 125 per cent of your home's value. So even if your mortgage is worth 100 per cent of your home's value, you should still be able to avail of that extra 25 per cent.

If your loan to value ratio on your mortgage is lower than 100 per cent then you will be able to borrow more.

As you are looking for a loan soon after taking out a mortgage you may have to answer some questions as to why you need extra credit already. Also, you will need to prove that you are in a sound financial position and that you will be able to keep up with repayments.

While it should be possible to get a secured loan as a new home owner, it is a big undertaking on top of your mortgage. If you are looking to borrow a smaller amount (under £20,000) for some furnishings or to consolidate other debts, a personal loan may be the better option as you are not risking your home if you fail to make repayments.

You may find it helpful to read other articles, such as 'What are the Pros and Cons of a Secured Loan', before finalising your decision on whether to apply for a secured loan or not.