Improving your Home With a Secured Loan

Moving home is common practice in the UK, with many homeowners uprooting every year or so for any number of reasons. For example they may have outgrown their current home, be too far away from work, dislike neighbours or the area, or simply want a change of scenery.

One of the key reasons people decide to move home is down to a lack of space. This is sometimes because of new additions to the family, starting a new home business or simply wanting to spread out more in a larger property.

If you find yourself in this position, improving your home with a secured loans might be a more desirable option than uprooting the family.

This is because the process of moving is often a stressful one and can end up being quite costly. You may find yourself lumbered with stamp duty, mortgage arrangement and exit fees, removal costs, legal and valuation fees, to name but a few.

As well as this, you may find you end up in a less desirable area, next to problematic neighbours compared to the location and neighbours that you felt comfortable with.

Therefore, taking out a secured loans and using it to add some extra space to your home is often an excellent option. As well as increasing the size of your home, such improvements usually increase the market value of the property.

The amount you are able to borrow with secured loans, the interest rate and terms will all depend on the lender used and more importantly your personal circumstances. Your credit rating, financial and employment status, and age at the time that the loan term ends are some of the key things that will be taken into consideration by a lender.

Another important factor is how much equity you have in your home. This can be calculated by deducting the outstanding mortgage from the property's market value. So, a home worth £100,000 with an £80,000 mortgage on it will have a so-called "loan-to-value" of 80%.

Until recently, a handful of lenders will allow you to borrow over and above the level of equity in your home. For example, you could borrow up to 125% of the value of a property.

The recent "credit crunch" has put paid to most such loans. In any event, one of the main risks in taking out a loan the same value or exceeding the property's equity is that you may be left with negative equity. This is when house prices fall and the value of your home is lower than the loaned amount.