Secured loan for homeowner wishing to consolidate his debts

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A young homeowner was looking for a loan of £ 70,000 against the value of his house, to consolidate his credit card debt and a personal loan. As a business executive, a third of his annual salary is made up of commissions. His partner is an independent trader.

He approached his mortgage lender for an additional advance on his mortgage, but they were unwilling to lend for debt consolidation.

Via Fair Investment, he found a second-tier lender who was willing to consider 100% of his income, plus that of his partner. And they would be prepared to accept the overpayments and not charge a penalty fee if the loan is prepaid.

What is a secured loan?

  • A second mortgage (or “homeowner’s loan”) is a secured loan – secured for the lender against the value of the property.
  • This is called a second mortgage because it sits behind the primary (first charge) mortgage on a property. In the event that a borrower is unable to meet their loan repayments and the property is returned, the priority lender has priority for repayment.
  • As a result, the interest rates on the second charge loans are higher than the standard monthly mortgage payments, reflecting the higher risk to the lender.

When secured borrowing can cut costs

Nonetheless, for this borrower, the overall monthly cost of his new second mortgage was the same as the amount he paid just for his personal loan.

The unused capacity of their monthly budget now allows him and his partner to make progress in reducing their overall debt instead of just struggling to meet interest payments.

Secured loan options

Written by Jennifer Stevenson,
May 26, 2019


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