Whether you are living in your parent’s house or in your own house, it matters a lot. At least in the lenders’ books! Being a home owner you enjoy credit advantage over those who live on rent. And herein I am writing to outline the credit advantage you can enjoy as a homeowner despite poor or not so perfect score.
Before taking this discussion further I want to clear here that there are no preferential points extended to home owners as against tenants by the credit bureaus. The delay in repayment of loan would equally hurt the score of the two. The advantage however is extended in some cases by the lender.
Being a homeowner, your financial condition is deemed to be more favourable than anyone who is living on rent. The high cost assets make you more worthy of drawing credit. It may sound unfair, but lenders when given a choice, prefer to choose a homeowner, even for unsecured loans. You may or may not use home equity as loan security; being a home owner you are worthy of raising more than the value of your property.
To understand this better, let’s take an example. Catherine is an IT professional. She owns a home worth £140000 in North West England. She is regular on her loan repayments and her current mortgage balance is, say, £75000. She plans to repay her loan within five years. Being regular in her loan payments, Catherine considered that her credit score would be absolutely fine for availing a personal loan for home renovation. However to her horror, she was quoted a very high interest rate by her current lender.
Should she go ahead or wait for next five years? The latter is certainly an impractical choice, so what is the best advice, let’s find out now.
The biggest myth circulated for home mortgages is that they lock in your debt to income ratio. Many people cease to borrow more as their credit score would never be perfect until they close down their home loan. However being a long term loan, your life can not enter a standstill till you pay back your loan. There are certain situations wherein you can and you should confidently contact a broker to locate flexible homeowner loans in UK for your credit issues. With low score, involving broker increases your chance of availing a low cost deal.
Here in this example, Catherine is calculating her credit worth from a wrong route. Being a homeowner she can borrow 70 to 80 per cent value of her property. However in this case, the value of her property would be calculated on the basis of her current home equity rights, i.e. £65000. So Catherine in the current example can raise approximately up to £50000 as a home owner.
Just like conventional loans, she can borrow secured or unsecured loans according to her needs. Availing bad credit loans as no guarantor homeowner loans, she can substantially save on the loan interest rate. But the secured loan would put the stakes of her property into risk. She would require to ensure the timely repayment to protect the ownership of her home.
Likewise to deal with urgent financial emergencies you can use homeownership to avail hassle free loans for unemployed people. Having home equity helps you get better loan terms besides the low interest rate.