A homeowner loan is used to extract value from your home or property and borrow money towards lifestyle purposes, home improvements or debt consolidation.
Homeowner loans are commonly known as ‘secured loans’ whereby you are securing your loan against the value of your property. The rule of thumb is: the higher the value and more equity you have in your home, the more you can borrow or higher loan-to-value (LTV) you can access.
If you are a homeowner, you would have made several mortgage repayments over the years and gained more equity in your home. You can now use this equity to borrow money, with lenders offering between £1,000 to £2.5 million, repaid over a period of 1 to 35 years.
However, you potentially risk losing the property or some equity in it if you cannot keep up with your repayments. Lenders will always try to avoid repossessing your home and this is usually a last resort.
All Purpose Loans offers a soft search application and a quick, simple way to get an initial homeowner loan quote. We work with the whole of market, allowing you to get a full comparison of rates available and find the best quote for you. Simply click on apply now below and you will be taken to our online application which can be completed in less than 5 minutes.
Secured loans: Homeowner loans are typically classed as secured loans, because the loan is secured against your property. It is also known as a second charge loan or second mortgage, because it is the second charge after the first mortgage repayment coming out of your property. Being second charge, it means that you are able to borrow less than your first main mortgage. Since your collateral is at risk, you can risk losing your property if you cannot keep up with your repayments long-term.
Unsecured loans: Homeowner loans can also be unsecured, where you are not securing the loan against your home or flat and instead, you are eligible based on your credit score and income. As a homeowner, you will sometimes be considered a very good person to lend to because you have been through the rigorous approval of getting a mortgage and are used to making regular monthly repayments. If you have maintained a good credit score over the years, a homeowner can usually get access to a personal loan with low rates.
Buy to let mortgages: This is used by property investors or homeowners who are looking to rent out their properties to tenants. This is a type of homeowner loan because it is secured against a property, however, the structure of the loan is a little different because it is being rented out and you will require a minimum deposit of 25% of the loan value. For more information, you can compare buy to let mortgages.
Equity release: This type of homeowner loan is used by those aged 55 and up to release cash currently tied up in their home. It is a popular choice for those looking to raise finance but also looking to stay in their residence long-term. The average amount borrowed is around 35% to 50% of the value of the property and charged at an interest rate of 5% of the amount withdrawn.
Home improvements: Homeowner loans are commonly used to finance home improvements such as adding new extensions, renovating kitchens, bathrooms and conservatories. This can be a good investment into improving the overall value of the home and indeed the quality of the family’s life. Many households use home improvement loans to make their homes more adjusted to senior living, with the use of ramps, stair lifts and easily accessible bathrooms.
Debt consolidation: You can use a homeowner loan for the purpose of consolidating your debts. Secured against your property, you are able to take all outstanding debts for credit cards, loans and education and put them into one single repayment each month. This allows you to continue living in your home, make your debt more efficient to pay off and eventually finish the loan term debt-free.
House and personal checks
Yes, you can borrow money with an outstanding mortgage – this is very common. You are not required to own the property outright. However, the more of the property you own, the more you may be able to borrow.
Yes, if secured against your home, you will likely incur valuation fees (between £400 to £1,000), legal fees (depending on your solicitor), land registry fees and sometimes broker fees (1% to 2% of loan value).
Some homeowner lenders offer their products with fixed or variable rates - allowing you to choose between a fixed rate which remains the same throughout, or a variable rate which could be cheaper based on market conditions.
Be sure to think about how long you would like the loan for and what it will be used for. If you find that you are in a position to repay early, you can usually do so, however early redemption fees may apply.
You can compare homeowner loans when you apply through All Purpose Loans. When you complete our online form, you will be given a series of pre-approved quotes, and you can compare deals and find the right one for you.
Your loan application will not be subject to a credit check until you proceed with the application. You will then undergo some further checks with the lender and be required to provide some additional information. When homeowner loans are approved, funds are usually provided into the customer’s bank account within 2 weeks.