Homeowner loans, also known as secured loans, equity loans, second mortgages or second charge mortgages, allow you to borrow large sums of money against the value of your property.
This type of loan can provide you with access to substantial funds, but it’s important to remember that your lender is protected because the loan is secured against the value of your home.
This means, if you struggle with your repayments, you could be at risk of your lender repossessing your home to cover the outstanding debt.
In this guide, we will cover everything you need to know before applying for a homeowner loan:
(1) To apply for a homeowner loan, you need to own all or part of your property.
The amount you can borrow is determined by your home equity, which is calculated using your loan-to-value ratio.
(2) The amount a lender is willing to offer you will also depend on several factors, including: credit score, affordability, first mortgage, debts and household outgoings – as well as your personal circumstances such as employment status.
(3) After agreeing terms with a lender, your loan is typically repaid monthly over the duration of the specified loan term.
Loan terms can last anywhere between 1 to 35 years.
If you’re in need of a substantial sum, usually in excess of £10,000, a homeowner loan might be a good option for you to explore.
Sums below £10,000 are often more effectively managed through a credit card or what’s known as an unsecured loan.
These are a good option if you have a strong credit history and need to borrow smaller amounts over a shorter period of time.
If you’re worried about the stress and complexity that comes with applying for a loan, having a qualified broker by your side can make the world of difference.
Their guidance can be invaluable, simplifying your journey from start to finish and ensuring that you make informed decisions every step of the way.
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One of main positives is the lower interest rates, making your repayments more manageable and potentially resulting in significant monthly savings.
That’s money back in your pocket each month compared with other funding options.
Homeowner loans often come with longer loan terms, allowing you more flexibility in structuring your repayments.
They also provide you with access to larger loan amounts when you need a significant sum.
Being accepted for a Homeowner loan is often smoother compared to unsecured loans because of the lender’s added security in the form of your home as collateral.
If you’re struggling to access funds, they might be a worthwhile consideration.
Before applying for a homeowner loan, there are some important steps to consider first:
Examine the equity you currently have in your home. If it’s not sufficient, you might need to wait until you’ve built up more equity or be prepared to borrow a smaller amount than you initially wanted.
Since homeowner loans typically have longer repayment terms, you should calculate if you can comfortably manage the repayments well into the future. Keep in mind that secured loans are subject to affordability and financial checks, so tidy up your finances, cancel unwanted subscriptions, and make sure all your payments are up to date before applying.
It’s wise to check your credit score using a free tool like Experian before applying. Rejected applications can negatively impact your credit file, so be prepared by checking your current score before you apply.
Never forget that if you fall significantly behind on your repayments, your home could be at risk of repossession. If you have concerns, consider discussing your options with an qualified advisor or exploring unsecured loans as an affordable alternative.
Your home’s safety is paramount..
If you’re coming to the end of your mortgage deal, you might be able to switch to a new lender and borrow the extra funds you need. This is often the cheapest way to raise money.
If you have accumulated debt and are struggling to meet the repayments, a Debt Consolidation Mortgage arranged through Your Mortgage People might be the answer.
If you’re over 55, Equity release products give you a chance to unlock the money in your home with no monthly repayments whilst you continue to live there.
Interest rates: When it comes to homeowner loans, interest rates can vary widely. The interest rate you receive is determined by several factors in your application. Lenders consider elements like your equity, the amount you’re borrowing, the duration of the loan, and your credit score to calculate a personalised interest rate. This means there’s no “typical” rate, and the variability allows lenders to adjust the rate to your specific financial situation.
Loan repayments:If you’ve taken out a homeowner loan and find yourself with some extra cash during your repayment period, we think it’s worth considering paying off your loan early. While these loans offer access to significant amounts of money, the sooner you start repaying, the better.
Keep an eye out for any early repayment charges, but know that settling your loan ahead of schedule could result in substantial savingsover the course of your original repayment period.
So, if the opportunity arises, it might be a smart move to chip away at that loan sooner rather than later.
You are eligible for a Homeowner Loan if you own a property outright or through a mortgage, and with most property types covered is doesn’t matter if that’s a house or a flat. You’ll also need to be a UK resident aged 18 or over.
Lenders will have their own eligibility criteria and you will need to pass an affordability check, but your advisor will explain all this to you before making an application. You could even get a Homeowner Loan with a less than perfect credit score, get in touch with us to find out!
With a Homeowner Loan arranged through Your Mortgage People you could borrow up to £150,000 to help consolidate debt, start those home improvements or fund a one-off purchase. The exact amounts you are able to borrow will depend on your individual circumstances and will vary from lender to lender. Whether you have a set amount in mind or want to see the possibilities, our qualified advisors will talk you through your options.
To get started with a Homeowner Loan enquiry, complete our quick and easy form and an advisor will call you back to discuss your options.
If you want to know more, why not check our guide to mortgage terms or FAQs section. We cover everything you need to know, explaining mortgage terms and commonly asked questions.
Alternatively, speak to one of our advisors to learn more about homeowner loans. Fill out a contact form by clicking the button below.
