Getting Secured Home Loans

For secured home loans, a homeowner puts up a house as collateral for a loan. The amount of money available for the loan is based on how much equity the homeowner has built up in the home. The money from secured home loans can be used for a specific big expense, such as major home renovations, college tuition or a vacation. The money can also be used to cover large emergency expenses, such as medical bills.

Secured home loans often have low interest rates because the security of putting the home up for collateral means the bank is less at risk. The downside is the home can be repossessed if the homeowner defaults on the loan.

There are two types of secured home loans available:

  • A second mortgage allows the homeowner to get one lump sum of money to go toward a major purchase.
  • A home equity line of credit creates a revolving line of credit that uses the equity in the home as the maximum limit of the credit. This gives the homeowner additional income over a period of time.

Step 1 - Gather Materials Needed to Apply

In considering applications for secured home loans, the bank or lending agency will require personal information and documentation such as:

  • Social Security Number
  • Date of birth
  • Occupation
  • Income
  • Recent pay stubs, W2s, or tax returns
  • Copy of driver's license or Social Security card
  • Amount owed on mortgage
  • Information on the lender that holds the mortgage
  • How often payments are made toward the mortgage
  • Information about the property, including its location, age and the approximate value
  • What other debt a homeowner has

Step 2 - Determine the Amount of Money Available

The amount of money available for secured home loans is based on how much equity the homeowner has built up in the home. The equity in the home is the difference between how much has been paid on the mortgage versus how much the home is actually worth. The value of the home can increase with time, improvements to the home and if the neighborhood becomes a more desirable place to live. To figure out the value of the home, real estate agents can give an appraisal. Many websites also provide services that give an approximate value of a property.

Step 3 - Choose a Lender

Different banks and lending agencies offer different terms on secured home loans. Credit unions, banks, savings and loans, mortgage companies and internet lending agencies are all places that offer secured home loans. Homeowners taking out secured home loans should consider:

  • The amount of money needed from the loan.
  • How high the interest rate will be.
  • How long it will take to pay off the loan.
  • The amount of closing costs or other fees.

Step 4 - Apply for the Secured Home Loan

Many banks and lending agencies offer online applications for secured home loans. A homeowner can also work directly with someone at a bank or other lending agency. After the initial application, more information may be requested. Before closing on the loan, the homeowner should make sure to understand all terms and costs related to the loan.