It’s difficult to get hold of your home’s equity right now, but that doesn’t mean that secured loans shouldn’t be part of your long-term plans.

In the future, when lenders become happier to lend money, there will be a lot of opportunity for people to use the equity in their home to fund home improvements, pay for a new car or help consolidate debts. But right now the key is to overpay on your mortgage and build up that equity for a rainy day.

Both Halifax and Nationwide have reported house price increases this month, and for the last few months, but prices are still subdued and people still have less equity in their home than they did two years ago. This means that if you want to increase your security and increase your borrowing potential, you need to increase that equity yourself.

Many people have a low mortgage rate right now – thanks to the Bank of England’s base rate being at 0.5%, tracker and standard variable rate loans are as low as they have ever been. So people have extra money to spend – and extra money to overpay on their mortgage.

Each mortgage overpayment is a step closer to returning to decent equity levels in your home. Increased equity leads to potential to mortgage or remortgage and it means more chances to get hold of secured loans in the future.

So talk to your mortgage adviser about your overpayment abilities. You need to find a happy medium between making the most of your reduced mortgage payments and not stretching yourself too far. A mortgage adviser will help you find that happy medium and will help you improve your chances of accessing credit in the future.

SOURCE: Halifax, Nationwide, October 2009

To keep up with the latest news and comments on current financial affairs please visit the Secured Loan Blog.

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