125 Secured Loans

All about 125% and Partially Secured Loans



If you’ve arrived at this website, it is probably because you want to find out more about 125 Secured Loans. So let’s take a look in more detail at what exactly this type of loan is.

In essence, a 125 Secured Loan is one that allows you to borrow up to 125% of the current value of your property, with the property itself used as security. So it is inherently risky, as you are actually borrowing more than your home is worth.

For this reason, it is not an arrangement that you should enter into lightly. You should consider all the pros and cons before you apply for a loan like this, and be pretty sure that you will be able to repay it, otherwise you could lose not just your home but other possessions too.

Generally, 125 Secured Loans are not given out to new lenders or to those buying their home for the first time. These loans are more commonly granted to borrowers who have an existing mortgage and want to borrow additional cash, either for a substantial home improvement or for some other large cash purchase. They are most frequently granted for home improvements, for the simple reason that the home improvement will actually increase the value of the property.

Let’s look at an example.

Say for example your home currently has a market value of $200,000 and the amount you currently owe on your mortgage is also $200,000. In order to increase your property’s value, you want to fit a new electrical wiring system, new plumbing and a central heating system, at a total cost of $50,000. You believe, based on other properties in your street, that once all of that work has been done, your home will have increased its market value to $300,000.

On the basis of a plan such as this one, your mortgage lender may agree to loan you the additional $50,000, secured against your property. That is a 125 secured loan.

Of course, not all lenders will agree to lend you 125% of the current value of your home. You will need to show that the value of the property will increase with the work you are undertaking, to a level higher than the total amount you will owe.

But what about if you want to borrow the money for a new car for example? In that case, you will find far fewer lenders who are willing to take the risk. It is actually a lot more difficult to get a 125 secured loan for anything other than home improvements that will increase your property’s value. So that new car will probably have to wait.

There are many factors that the lender will take into consideration when looking at your application for the loan. The key thing from the lenders perspective is the risk factor. How likely is it you will repay the loan rather than defaulting? No mortgage lender wants their customers to default on their loans, it’s just not good business.

For this reason, lenders sometimes offer the alternative of a 125 partially secured loan. This is where the additional 25% you borrow is charged at a higher rate of interest than the original 100%. This counterbalances some of the risk on the part of the lender, because they are seeing a greater return on their investment.

In conclusion, the key thing to consider with 125 secured loans is the fact that you are taking a risk by borrowing such a large amount, so you want to make sure that you will be able to pay it back.