Decision in Principle Form
Secured Loans
With ever increasing and burdening regulation within the residential mortgage marketplace, advisers need to be equipped with a broad proposition of products to suit all of their clients’ needs. The principles of "TCF” and "Best advice" dictate that viable alternatives to the standard re-financing options are explored. Our secured loan proposition through the industry’s leading providers ensures a perfect fit with standard residential mortgage business.
There are a number of secured loan lenders operating within the UK, offering products to suit all circumstances. In the same way as most banks and mortgage lenders’ products are defined, secured loans fall into three main categories:
Prime
A typical prime applicant for a secured loan would have a clean credit history and high levels of equity in their property
Sub-prime
Applicants with bad credit history caused by mortgage arrears, defaults on other finance or CCJs would fall into the sub-prime category
Non-status or non-conforming
Non-status products are more suited to self-employed applicants wishing to self-certify their income, or those applying for a secured loan against what a lender would define as a non-standard construction property type or basis of ownership.
One of the main benefits of secured loans is the fact that they are not linked to the borrowers existing mortgage. Similarly, if a borrower is currently on a fixed rate for their first charge, they may not want to expose their entire mortgage account to a higher rate by remortgaging, particularly if their credit status has deteriorated. They may have additionally been declined for a further advance on their existing mortgage.
Secured loans do not require the borrower to pay any up-front fees. All of the expenses associated with arranging the finance are absorbed by Knock Knock Solutions.
A secured loan may be a more appropriate recommendation than a remortgage due to:
- Avoidance of early redemption penalties on main mortgage
- Protect competitive fixed rate
- Shorter repayment period
- Avoid exposing entire mortgage account to a higher rate if the clients’ credit status has deteriorated
- The client may have been declined a further advance
- Flexible and varied criteria – For example more generous income calculations than offered than a re-mortgage or further advance
With recent changes to the Consumer Credit Act the maximum redemption penalty charged on a secured loan is one month’s deferred interest on the outstanding balance – Again benefiting the borrower and adding flexibility to your options.
Commissions
Typically commissions paid for secured lending tend to be around 3.5% of the loan advance. Knock Knock Solutions pay 60% of this commission to you, the introducer.
As the packager, we are responsible and pay for costs of valuations, references, searches and lender questionnaires. We charge a "Processing Fee" to the client, which we retain to cover these costs. This is calculated on a sliding scale dependant on loan amount. Most lenders cap the total amount of fees that can be charged, but in most cases you will still be able to charge a "Broker Fee" on top of our processing fee which you, the introducer, retain 100%.