Homeowner loans are types of loans for which tenants are not eligible and only people who own their own home can apply.
Homeowners can apply for either an unsecured or a secured homeowner loan. Before the advent of the credit crunch it was relatively easy for a homeowner to obtain an unsecured loan, because if the borrower defaulted on payments the loan lender could place an inhibition on the property.
An inhibition is in reality a form of decree secured against the property, and it is registered at the Land Registry. This means that the loan lender will eventually get his money back as the homeowner will not be able to sell the house until the inhibition is paid off.
As loan funding of any kind is not very available in the current economic climate unsecured loans are almost a thing of the past unless you are someone who hardly requires a loan in the first place. You would have to be settled as regards your job and your years at the same address to have any chance at all of being considered for an unsecured loan.
The only real hope of a homeowner obtaining a loan at present is by applying for a secured loan. As the name secured suggests a secured homeowner loan is secured by an asset, and in this case the asset is the equity on the property.
Before the recession it was possible to obtain a secured homeowner loan up to 125% of the value of the property. This meant that if a property was worth 200,000 you could add up to 25% more than the value of the property which in this case meant that if the mortgage balance was100,000 it was possible in theory to be granted a homeowner loan up to a maximum of 50,000.
The situation regarding equity is very different now, and the 125% equity secured homeowner loan is a thing of the past and equity margins are now 70% for self employed borrowers and 80% for the employed.
Homeowner loans have really gone from one extreme to the other. Secured loans are now too difficult to obtain whereas before the recession the underwriting criteria was often too lax.
It is to be hoped that the fate of the homeowner loan will change and that a lender will appear who is willing to grant up to 90% LTV homeowner loans.This will kick start this finance sector before it is too late.
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