The Changing Face Of Secured Homeowner Loans.

Homeowner loans as the name suggests are a form of loan for which only homeowners are eligible to 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 as it form of security is placed on the Land Registry & if the homeowner wants to sell up & move house the inhibition has to be payed off & the funds at last go to the loan granter.

Now with the shortage of funding available it almost impossible even for a homeowner to obtain an unsecured loan unless he is completely blue chip. That means someone who has lived at the same address for a number of years & is on a good salary in a job that he has been in for several years.

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 & 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 & the 125% equity secured homeowner loan is thing of the past & equity margins are now 70% for self employed borrowers & 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.

The ideal scenario would be for a new homeowner loan lender to enter the market place who would grant secured loans of up to 90% LTV & help revive this most ailing of industries.

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