Can You Have Two Secured Loans on Your Home

Many people who have owned their own home for a long time may have taken out a secured loan a long time ago. Circumstances change and many people may find themselves wanting to take out another sizeable loan. If you are one of these people, you may find yourself asking yourself if you can have two secured loans on your home? In this article we provide some answers and take a look at the issues.

If you are wondering whether you can take out a second secured loan against your home the most likely answer is yes, you can. However, it will depend on a number of factors including the current value of your home, how large your existing secured loan is, and your current financial position.

If you took out your original secured loan a few years ago your house is now likely to be worth significantly more than it was then. In this case you should have no problem getting a second secured loan.

For example, if your home is worth £250,000 and you have £150,000 outstanding on your mortgage and existing secured loan combined, you should be able to avail of a further secured loan up to £100,000. This presumes the lender will allow you to borrow up to 100% of the value of your home. Some will let you borrow up to 125%.

However, if you want to use the value of your home to raise capital, a second secured loan may not be the best option. With three separate loans against your home things could begin to get complicated. Why not take out a new secured loan and use some of that money to pay off the original secured loan? Or consider a secured loans remortgage. With the money from your new remortgage you can raise capital, pay off your secured loan and be left with one simple repayment each month. In fact, every homeowner should consider remortgaging once every few years. The mortgage market is constantly changing and many people find that they can save money if they switch mortgage lender.

One possible scenario where a second secured loan might be the better option is that if you are locked into fixed rate terms on your first secured loan and your mortgage. If you are, you may face heavy redemption penalties if you try to repay these debts early. However, for the sake of a simple life you should try to replace your existing secured loan with a new one, or else remortgage, rather than have two secured loans on your home. These options can still serve the same purpose, whether you want to raise capital, consolidate your debts, or simply treat yourself.