Secured Loans

At Clifton Private Finance, we work with you to find the best secured loans on the UK market, matching you to a suitable lender to get a flexible, powerful, and cost-effective loan that’s tailored to your exact needs. Read on to learn all about secured loans for property owners and the options available to you.

Key Takeaways

• Secured loans allow you to borrow larger sums at lower interest rates than unsecured alternatives
• Loan sizes are determined by your property’s value and equity.
• Options include remortgaging, second-charge loans, bridging finance, and equity release.
• Clifton Private Finance are here to help you compare products, select the best option, and ensure a smooth application process.

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A Guide to Secured Loans

A low-rate secured loan will provide you with the capital you’re after at a rate that’s far superior to an unsecured loan. With a loan size that’s limited only by the value of your property and terms that can spread the repayments over many years to keep monthly outgoings low, a property-secured loan is a powerful way to achieve your dreams. Whether it’s for home renovations, debt consolidation, or just to have a really great holiday, a secured loan through Clifton Private Finance is a safe and reliable way to get the money you need.

Secured vs. unsecured loans

Equity and Loan-to-Value

To work out the size of property secured loan you can get, it’s essential to understand equity and loan-to-value (LTV).

Equity represents the size of your investment in your property. It’s the amount of your home that you actually own and isn’t already tied to an existing mortgage or other secured loan. For example, a property valued at £200,000 with an outstanding mortgage of £120,000 has £80,000 equity.

Loan-to-Value (LTV) is the size of the loan when compared to your property’s market value. In the example, where the mortgage is £120,000 and the market value of the property is £200,000, the LTV is 60%.

When lenders calculate secured loans, they use a combined loan-to-value, taking all the loans together. For example, a property valued at £200,000 with a £120,000 mortgage and a £20,000 homeowner loan attached to it, would represent a LTV of 70% (£120k plus £20k out of £200k).

Depending on the type of loan, lenders are likely to cap your maximum LTV at 85%. For example, a property worth £200,000 with an existing £120,000 mortgage would allow for an additional £50,000 secured loan for a total of £170,000 of secured finance. (£170k is 85% of £200k).

First and Second-Charge Secured Loans

Loans secured by your property have an order of priority. The senior loan is known as the first-charge loan, the next is the second-charge loan and additional loans (though rare) would take the place of third-charge, fourth-charge, etc.

This order is used to determine how the loans are repaid to lenders should you default and the property is repossessed. The first-charge loan (normally your primary mortgage) will be paid in full first, then the second-charge loan (often a homeowner loan) and so on.

For this reason, first-charge loans are considered lower risk for lenders than second-charge loans. To mitigate the risk, second-charge loans will usually have a higher interest rate, and third-charge loans higher still. A primary mortgage (first-charge) will typically have the best interest rate possible for you to get.

The Different Types of Secured Loans

First-Charge Mortgages and Remortgages

When looking to raise additional capital against your home, one option is to remortgage the property. This means taking out a large, new, first-charge mortgage, using it to pay off and replace your existing mortgage, while simultaneously providing you with additional capital.

For example, a property valued at £300,000 with £180,000 of outstanding mortgage, could be remortgaged for £250,000, paying off the current mortgage and providing £70,000 in cash for the owner.

Because the first-charge mortgage has the lowest interest rate, a remortgage is often advantageous. However, there are many factors that influence that decision, including:

• Is the existing mortgage rate better than current market rates? - It may be unwise to replace your existing mortgage at a higher rate.
• Have your circumstances changed? - A remortgage is a complete mortgage application process that will involve significant credit checks and affordability stress testing.
• Will you need to pay early repayment charges (ERCs) - If you are midway through a set fixed term, there are likely to be costly charges to a remortgage.
• Balancing the advantages and disadvantages of a remortgage is essential to making a sensible financial decision. The mortgage team at Clifton Private Finance will work with you to assess your precise situation and help you evaluate your choices.

Capital Repayment vs. Interest-Only Mortgages

There are two main types of mortgage - a capital repayment mortgage (most often used for your primary home) where the balance of the mortgage lowers over time as it is repaid; and an interest-only mortgage (typical for buy-to-let properties) where the low monthly repayment only represents the interest and the balance never changes until the house is sold or refinanced at the end of the term.

If you remortgage, you may want to consider if you wish to change your mortgage structure or keep the current one. Speak to a Clifton Private Finance advisor to understand how the differences may affect you.

Second-Charge Homeowner Loans

A second-charge loan, often called a homeowner loan or second mortgage, is a subordinate (second-charge) loan placed on your property. Rather than a remortgage, a second-charge loan doesn’t disturb the existing first-charge loan, leaving it in place as normal. When you take out a homeowner loan, you will:

• Not affect the current mortgage.
• Get a different interest rate to your primary mortgage.
• Have an additional monthly repayment to make.
• Have a new loan with its own term that may extend beyond the original mortgage term.

The size of your second-charge loan will depend on the combined LTV of that and the current balance of your existing mortgage. Together, these loans will rarely reach beyond 85% LTV. However, other factors can limit that loan size further, including your current credit score and history, your affordability and debt-to-income ratio, and the lender supplying the loan.

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Bridging Finance

Bridging finance is a specialist secured loan product that provides near-instant funding for property purchases or business opportunities by leveraging the equity in your property. Bridging loans are short-term finance solutions designed to take advantage of time-sensitive situations, such as buying property at action or securing a new home without waiting for other links in a property chain.

To learn more about bridging finance and its powerful uses, read our comprehensive Guide to Bridging Loans.

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Equity Release

Homeowners aged 55 or older gain access to a range of products collectively known as equity release. These loan solutions provide a unique structure for obtaining capital based on your home equity, where there are no monthly repayments and the balance of the loan (plus accrued interest) is repaid when you have a life event that means you no longer need the home (when you sell, move into full-time care, or pass away). Equity release products provide a way to unlock the capital in your property without selling or move out of your home.

Equity release includes:

• Lifetime mortgages - A lump sum structure that provides capital immediately with no regular repayment schedule.
• Drawdown mortgages - A lifetime mortgage structure with delayed funds release to help manage interest and capital.
• RIO mortgages - A hybrid lifetime mortgage and interest-only mortgage structure for retirees.
• Home Equity Line of Credit (HELOC) - A revolving credit facility (line of credit) that acts like a credit card against your home equity.

Equity release is well regulated, and all equity release products arranged by Clifton Private Finance are backed with independent legal advice and a full no negative equity guarantee to protect your estate.

Comparing Secured Loans

Secured Loan Comparison

Applying for a Secured Loan with Clifton Private Finance

At Clifton Private Finance, we work with you to look at your full financial picture, helping you make an informed decision to select the best secured loan for use. Our team of experienced advisors are here to answer any questions you may have, supporting you throughout the process as we match you to lenders from the entire UK marketplace of banks and specialist institutions offering low-cost secured loans on your property.

Whether you’re looking to modernise your house, pay off high-interest credit card debt, or simply enjoy the money you have invested, release the funds tied up in your property with a secured loan. Contact us for a free consultation today.

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