One of the disadvantages of unitranche loans is that they are a high risk option. This is because they are mortgages that have been given out on what is known as a ‘contingent’ basis. This means that if the mortgage is not repaid then the bank does not have to worry about being left with any money to pay off the loan. The problem here is that if you are unable to pay off your unitranche mortgage then the bank will not get any of its money back. This means that although the disadvantages of unitranche loans are that they involve high risks, they also come with significant rewards.
As with any mortgage there are two main risks that are associated with this type of loan. First, in the event of you not being able to pay off your mortgage then you risk losing your home. This is a risk that you have to take. If you do not want to risk your home then you are not likely to get this type of mortgage. However, on the other hand, if you are able to pay off your mortgage and your circumstances improve then you could find yourself in a very strong position where you could stay in your home.
Unitranches are generally given out on what is known as ‘first offer’ basis
The second risk that is associated with this loan comes with the way that it is given out. Unitranches are generally given out on what is known as ‘first offer’ basis. This means that the lender has to offer the borrower their mortgage on the same day that the offer is made. This means that the interest rates will usually be higher than other forms of mortgages. This is often because people who would normally be considered a good credit risk are seen as high risk.
However, on the positive side of this loan there are also the advantages of it
Unitranches when it comes to interest rates are generally a better option than standard mortgages in that they are generally easier to get. It is not impossible to get a unitranche on a regular basis, although you are more likely to be qualified for something that is more suited to your needs. This means that you could potentially save money on the monthly repayments that you make.
Another advantage of this type of loan is that it is flexible when it comes to repayments. This is not true with all types of loans. With this one you can generally choose the time that you pay back the loan. It is also possible to pay off the loan early, which will reduce the amount that you have to pay back, but you will also benefit from a lower monthly mortgage payment.
The disadvantages of unitranche loans are also plentiful. Firstly there is the fact that these loans are not usually available from high street banks or building societies. In most cases a loan will need to be sourced through one of the specialist lenders that deal with these types of mortgages. When you look for this type of mortgage, there is also the fact that some lenders may attempt to give you a loan that sounds too good to be true. In fact in many cases these types of mortgage products have been designed specifically with the potential borrower in mind.
Rates of interest that are attached to them
Unitranches usually come with variable rates of interest and as a result can be quite expensive to get the monthly repayments at. This can work out much more expensive than the actual cost of the property that you are buying. This is because you could end up paying thousands of pounds in interest charges over the term of the loan. However, the upside to this is that if you do not keep up with repayments then you could lose your home. If the worst happens and you cannot get back on track then you will lose your home anyway.
One of the main disadvantages of unitranches is that they are not actually designed to be all that secure. In fact they have one of the highest rates of fraud and house theft in the industry. Many people who get themselves a loan will often live in the property for only a few months before selling it on. Once they move out the property will revert to the lender and you will be left without the money that you borrowed. If it is an older property then you could be looking at losing your home.