Secured Loan Unencumbered Property – Is It Possible?
Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable
Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable
Secured loans can be a bit tricky, especially when it comes to an unencumbered property. But there’s no need to fret. This guide is here to help you understand what it all means. Every month, over 6,900 people check out our website to learn more about secured loans.
In this guide, we’ll look at:
- The meaning of unencumbered properties.
- The cost of a bad secured loan.
- The process of getting a loan on an unencumbered property.
- Other things lenders will think about.
- Some other options if a secured loan isn’t right for you.
We know that dealing with money can feel tough. You might be worried about debt or the risks of a secured loan. But don’t worry, we’re here to help.
Let’s dive in and learn about secured loans on unencumbered properties together.
What are unencumbered properties?
Unencumbered properties are properties that are free from debt. These properties are not being used as security within any existing credit agreements, such as a mortgage or home equity loan, i.e. they are free from encumbrances.
Most people won’t own an unencumbered property until they are much older and have managed to pay off the mortgage they used to buy the property many years earlier.
Unencumbered can refer to other assets as well, such as a vehicle that has been fully purchased without an outstanding loan and isn’t listed as collateral within any other secured loans.
The opposite of an unencumbered asset is an encumbered asset, which means creditors still have a claim to the asset if a repayment plan isn’t maintained.
Why take out a secured loan on an unencumbered property?
Homeowners will have different reasons to take out a secured loan or mortgage against an unencumbered property. Some of the most common reasons include:
- To make some home improvements or complete renovations
- To invest the money elsewhere, possibly in other properties
- To pay for private medical or education expenses
- To pay for luxury holidays or big-ticket items like a new car
- To gift the money to loved ones looking to get on the property ladder
Taking out a secured loan on an unencumbered property is often done to make home improvements, such as adding a conservatory or getting a new bathroom. The benefit of this is that the property value can increase as a result of the changes.
Lender |
APRC |
Monthly payment |
Total amount repayable |
|---|---|---|---|
| United Trust Bank Ltd | 5.99% |
£218.73 |
£26,247.92 |
| Pepper Money | 6.86% |
£220.24 |
£26,429.17 |
| Together | 6.95% |
£220.40 |
£26,447.92 |
| Selina | 7.5% |
£221.35 |
£26,562.50 |
| Equifinance | 7.7% |
£221.70 |
£26,604.17 |
| Spring | 10.5% |
£226.56 |
£27,187.50 |
| Loan Logics | 11.2% |
£227.78 |
£27,333.33 |
| Evolution | 11.28% |
£227.92 |
£27,350.00 |
Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable.
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Can I get a secured loan on an unencumbered property with bad credit?
It’s not impossible to get a secured loan on an unencumbered property with a bad credit rating. Naturally, it will be somewhat more difficult.
How much more difficult will it be? That depends on your exact credit score and history. Missing a couple of payments won’t be as big a problem as previous CCJs, repossessions, and bankruptcies.
Is it easy to get an unencumbered mortgage?
It’s usually much easier to get a mortgage on an unencumbered property than it is to get a mortgage to buy a property. As you already own 100% of the property, the lender faces little risk by providing you with a mortgage.
However, it may not be easy to secure a larger mortgage on an unencumbered property. And here’s why…
Most people who own unencumbered property are in their later working life. They’ve worked hard and paid off their mortgage over two or three decades to own their home outright. Thus, they may not have as many working years ahead of them, and therefore, lenders might not be able to offer them a large mortgage.
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Other factors lenders will consider
The lender will decide on your application by looking at your credit score and your age, but they will also consider other factors, such as what you want the loan for, the current property market conditions, and your borrower’s overall financial health.
