New Increase In Loan To Value For Secured Loans

Mortgages and remortgages declined in the course of the credit crisis with secured loans affected even more adversely.

Before the recession, there were more than twenty secured loan lenders operating, and homeowners were only too willing to take advantage of the low rates and the array of different homeowner loan plans on offer.

It was possible to obtain a secured loan at 125% loan to value, which meant that a homeowner could borrow up to 125% of the value of the property

That was to say, that secured loans were out there at up to 25% more than the property was actually worth.

If a home had a value of 200,000 and a mortgage balance of 190,000 secured on it, in theory it was possible to obtain a loan of up to 60,000.

This plan worked to an extent when property prices were rising steeply, but when they statrted to fall, major trouble ensued for the lenders offering these loans, such as First Plus.

These 125% loans were dropped like a hot cake, and even the common loan to values of 115%, 100%, 95% and even 90% were abolished.

For a time, the maximum LTV even for employed applicants was restricted to only 70% until one lender, that is the Cardiff based Nemo Loans, slackened the LTV for employed borrowers to 80%.

Nemo used to provide loans to self employed people at 100% LTV, but they totally abandoned the self employed loans sector.

Many homeowners just could not obtain a secured loan due to almost being in the negative equity trap.

Those who were self employed suffered the worse fate, with the withdrawal of self declarations of income, where it is possible to declare one's own net profit without any official proof.

Accounts were required which posed a major propblem to those who mainly deal in cash.

Only very recently Link Loans brought in a plan for self employed homeowners enabling them to obtain self employed loans after only being in business for six months.However the maximum LTV is 60% and three months bank statements are needed to show earnings being deposited.

However it can offer a good alternative to those self employed who cannot remortgage due to lack of accounts.

Secured loans are to be available from Nemo Loans as of next week at up to 85% LTV.

They are also bringing back loans for the self empoloyed at 75% LTV, but the borrower must produce an accountant's reference.

Things look on the up as regards secured loans.

by: Liz Moir

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