- Loan

Facts Concerning a Secured Home Loan

When one thinks of a secured home loan, the first thing that comes to mind is the mortgage on your own property. Although this is certainly true, other loans fall into this category as well. It is important to understand the risks involved and how to avoid making the wrong decision.


Everyone is aware of the most common secured home loan, that of the home mortgage. However, any time the home is used as security for a loan, it still falls into that category. These type loans should be used very sparingly and only as a very last resort when no other alternative exists.


Besides the mortgage on a homeowner’s primary mortgage, a secured home loan is commonly used to make repairs or improvements to the home. In addition, sometimes these type loans are used to consolidate debts, however, this should be done with a great deal of caution. Your home is the most important asset you own, and you want to avoid doing anything that could jeopardize that.


When a borrower obtains a secondary secured home loan, it is likely that the interest rate will be lower and the term will be longer than with an unsecured loan. For the homeowner who has less than perfect credit, there is a better chance the loan will be approved with the borrower’s home being used to secure the loan. There may also be tax advantages to using your home to secure a loan, but this will vary depending where you live and the purpose of the loan.


One of the most important disadvantages of a secured home loan is that you can lose your home if you default in the payments. This pertains not only to the primary mortgage, but also to any other loans you have placed using your home as collateral. It is of little importance that you are timely with your mortgage payments; if you default on a secondary loan secured by your home, you can still lose it in a foreclosure proceeding. For this reason, it is pertinent that you know how much you can afford before using your home as collateral for a loan.


A secured home loan can be quite misleading if the homeowner is not aware of the terms of the contract. Although most people do understand the potential of losing a home if primary payments are not made, it’s important for it to be made clear that it’s just as important when a secondary loan again the home is made. Quite often, the lender does not make this clear, assuming the borrower knows what he is doing, and sadly, this isn’t always true. You must be very cautious when using your home to secure a loan.


Your home is your greatest asset, and though your primary mortgage is certainly a secured home loan, be very cautious about placing any other loans against it. If you plan to make repairs or improvements, be certain that you can afford the payments and understand that default on a second mortgage loan can also lead to the loss of your home. Caution should be exercised when placing any loan against your home and should only be done if no other means of obtaining the necessary funds exists.