Homeowner Loans

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Borrow money with low-interest homeowner loans

In today’s competitive economic climate, more and more people are finding they need to take out loans to finance purchases. While plenty of loan providers are available, finding one with the right terms for your requirements is no easy feat.

  • Simple, easy application
  • We search lenders to get you the best deal
  • 5-star customer service
  • No impact on your credit score
  • No upfront fees or hidden charges
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Are you a homeowner or a tenant?

In today’s competitive economic climate, more and more people are finding they need to take out loans to finance purchases. While plenty of loan providers are available, finding one with the right terms for your requirements is no easy feat.

When it comes to borrowing money, homeowners have more options than most other people. Owning a property enables you to take out a larger loan and enjoy more favourable interest rates.

A homeowner loan could be the best solution if you want to pay for debt consolidation, home renovations, private school fees, or even a luxury holiday.

Find out whether you’re eligible for a homeowner loan, and what you can expect when applying for homeowner loans.

What are homeowner loans?

Homeowner loans – also known as secured loans and second-charge mortgages – are borrowing solutions that require you to use your home as collateral. It can be a residential house, flat or bungalow, but you must have viable equity in the property.

For example, if your property is worth £250,000 and your outstanding mortgage is £180,000, you would have £70,000 in equity.

The amount you can borrow depends on your equity, and lenders will offer an amount based on their criteria (which we’ll cover later).

As long as you make the monthly repayments on time, you can repay the loan without worrying about your property.

You could lose the property to the lender if you don’t meet your repayment obligations.

How does a secured homeowner loan work?

Homeowner loans are quite flexible because there’s no set amount that one person can borrow. It depends on numerous factors, but the most important is the equity you own in your home.

As we just covered, you can only borrow money for the portion of the property you own, so you can secure a large loan if you own a significant percentage of the home.

Once you receive the money, you can use it for numerous purposes, including:

  • Renovations and improvements to your current property.
  • Purchasing a new car or going on holiday.
  • Paying for school fees or private tuition.
  • Consolidating existing borrowing into a monthly repayment amount.

While homeowner loans are flexible, a lender will want to know what you plan to use the loan for and evaluate your application based on whether they think you’ll pay back the money.

Homeowner Loan Interest Rates

A loan secured against your home will also have different interest rates depending on your lender’s agreement. Knowing the difference between them is essential – especially as they could impact your repayments.

  • Variable rates: Many loans use the Bank of England base rates, so your loan payments could increase if these change.
  • Short-term rates: Fixed interest rates for some of the term, but then you move onto the standard variable rate.
  • Fixed for term: These loans have the same interest rates for the entire duration. Even if the repayment period is ten years, you’ll pay the same each month.

What is the loan to value ratio?

Loan to Value Ratio (LVR) is a financial term often used by the lender to calculate the value of a loan against the value of the asset that is being purchased.

It is a term which is also used in mortgage lending, and is calculated by taking the loan amount and dividing it by the value of the asset being borrowed against. In the case of a secured loan, it will be the amount required in the loan divided by the value of the property that the loan is being secured against, in most cases, your house.

How much is my property worth?

In order to establish how much money you can borrow with a secured loan, you’ll first need to know the value of the property which you wish to secure the loan against.

The most efficient way to get this done is to have your home valued. This is when a professional comes to visit the property to value it on its attributes, condition and location, and then compare this to similar properties in the current market.

Once you have had your property officially valued, you can use this information in your application for a secured loan. However it’s worth noting that the bank or lender may ask for a second opinion before proceeding.

The advantages of homeowner loans

Homeowner loans have many advantages, and if you understand what you’re getting into, you’ll find your homeowner loan opens up new opportunities to build a stronger credit score.

Here are the pros of applying for a homeowner loan.

The loans offer flexibility

While many borrowing solutions have strict rules about what you can use the money for, secured loans are more open. You can use them for legal purposes, but you should ensure you spend the money wisely.

Credit scores aren’t everything

Your credit rating will always be important, but homeowner loans aren’t dependent on an excellent score. You can still access a loan, even with a poor credit history, because you’re a homeowner.

As lenders use the equity in your home to calculate an amount, you might find that you’re still offered a loan and favourable terms because you have security for lenders.

The interest rates can be low

Again, as lenders have security in the form of your home, there’s less risk associated with the loan. While many loans have hefty interest rates, homeowner loans can often be less expensive each month – especially as you can borrow the money over a longer time.

Borrow larger sums of money

Homeowners can also borrow more money than people without a home. For example, most personal loans are capped at £25,000 because people cannot offer a lot of collateral – but secured loans are different.

If you have a lot of equity, you can borrow up to that amount – although lenders usually offer a loan-to-value ratio of 85%.

Some people can borrow up to £250,000 depending on their lender and equity, so there are plenty of opportunities to finance large purchases.

Extended repayment terms

Perhaps the most attractive benefit of homeowner loans is their long repayment terms, which are easier to deal with than short-term loans. You’ll usually pay these loans back over many years instead of months, giving you more flexibility financially.

Yes, there’s a longer commitment, but long-term repayments are much easier to budget than paying back a loan over a few months.

The disadvantages of homeowner loans

Of course, there are plenty of factors to consider before taking out a homeowner loan, as nothing is perfect. Borrowing money is always a commitment with potential consequences, and it’s essential to consider the drawbacks of these loans before applying for one.

The overall interest rates will be higher

When taking out a homeowner loan, you can spread the payments over a longer term – which is an advantage. However, doing this also means you’ll end up paying interest on your outstanding debt.

Some people don’t like paying extra interest, but these loans offer more security and can easily fit into your monthly budget.

It’s tempting to borrow more

You might know how much you want to borrow but discover you can borrow more. It’s easy to get carried away, but it’s also a huge mistake.

When you choose to borrow money, think about how much you can realistically afford and stick to that amount. Many people decide to loan more money, and they get into trouble further down the line.

There are serious repercussions if you don’t make loan repayments

When you take out a loan, the lender will expect you to make your monthly payments on time. If you default on the agreement, there will be repercussions – especially if it’s a recurrent problem.

You could risk losing your home and having a poor credit score, which will impact your finances in the future.

Most large purchases are subject to a credit search, and a high score is challenging to build up.

Most lenders have an early repayment charge

When a loan provider agrees to lend you money, they expect you to pay it back and do it within the allotted time (even if that’s years).

The main reason is that lenders want to receive interest for the loan, but if you pay it back quicker than initially agreed, they’ll sacrifice repayment amounts.

A loan provider will often include early repayment charges to get around this and still give borrowers flexibility.

These charges can be pretty high, so it’s essential to be aware of them before entering into a loan arrangement.

Secured property loan or unsecured loan? How to decide

An unsecured loan is a type of personal loan where you are able to borrow money without using any collateral on your end to ‘secure’ it. And certain factors will play a part in how much you can borrow.

These factors are dependent on the loan provider or lender. Generally, things that will be taken into consideration include: the sum of money you wish to borrow, your own financial history or credit score, and other personal circumstances such as your income, and the reason you require the unsecured loan.

With an unsecured loan, the amount you can borrow will be significantly lower than other loan types.

An unsecured personal loan is usually harder to attain, despite borrowing less money and paying back higher interest, because the lender is at higher risk without something of value to secure the loan against.

Saying that, an unsecured personal loan could be a good alternative if you want to borrow a smaller amount or don’t want to be tied into a long-term payment plan. You can usually borrow up to £25,000 and pay the loan back over months instead of years. However, your eligibility for an unsecured loan is subject to checks from the lender.

People with a bad credit history are unlikely to be eligible for unsecured loans, but if you are, you’ll likely only be offered a higher interest rate.

Whichever choice you decide on, it’s important to compare loans and shop around to find the best deal and best interest rate before taking it out. Think carefully before securing a loan against something you cannot afford to lose, and if you’re under any doubt make use of a money advice service before making the decision.

Eligibility for home and property secured loans

Anyone who is either a homeowner, mortgage payer, or owner of other property is theoretically eligible to take out a homeowner secured loan. As long as you own equity in your property, you can get a loan, but the amount you receive will also depend on your credit rating and other factors.

Your circumstances, such as employment history and affordability, will also be considered, but the deciding factor will always be your property equity.

How much can I borrow with a loan secured against property?

When considering taking out a loan secured against your property, the value of the property will always play a large role in determining the amount you can borrow.

This is relatively similar to the process when taking out a mortgage, in that the mortgage lender will only lend an amount relative to the amount the person is earning, as well as other metrics like good credit history and even other expenses like household bills.

Essentially someone earning average wage will not be able to get a mortgage for a mansion. Similarly, if the property you are using to secure a loan is worth £300k, it’s unlikely you’ll be able to borrow £600k, because then half of the loan is unsecured.

Essentially, the value of the lump sum you will receive in the secured property loan depends on many factors that are specific to you, particularly how much equity you have to put up to secure the loan itself.

It’s worth noting that different lenders might offer different amounts (and different interest rates) for the same value of property, so make sure to compare loans and seek advice from a third party that is not a lender before taking one out.

When should I borrow money against my property?

Taking out a homeowner loan is an advisable option when you need to borrow a particularly large amount of money. Typically you will have exhausted other options beforehand like unsecured loans, personal loans, credit cards, or loans secured against other assets that aren’t your property.

If the sum that you need is attainable by securing the loan against something else like a vehicle, valuable belongings or cash savings, it’s generally a better option. Whilst you then risk the other asset being repossessed in the case of defaulting on payments, the vast majority of people would rather lose a vehicle than their home.

Securing the loan against property enables you to borrow larger sums of money for bigger expenditures. Examples of these types of expenditures could be putting down a deposit on another property, for doing building improvements on your existing property, or opening or expanding a business.

These types of investments will all likely return dividends, whereas if you spent the loan money on something like a lavish holiday, you are in no better position than before, but you will have more debts to pay.

It’s not advisable to increase debts without purchasing something of value or increasing the value of an existing asset. Nor is it advisable to take out a secured loan if you have outstanding debt or bad credit for a reason that you cannot remedy.

Use Believe Money to get the best secured loan against your property

Before you get a secured loan against your property, use Believe Money to help you compare secured loans.

We partner with specialist lenders

Mainstream lenders are fine as long as you meet their criteria. As a broker, we work with specialist lenders who are more willing to loan money based on an applicant’s personal circumstances instead of whether they tick each box.

As such, you’ll be able to find competitive rates and have access to providers that you might not know about.

Support during the loan application process

Our brokers don’t just give you the provider’s contact details; they support you through the homeowner loan application stage. Whether you need help with gathering your financial documents or arranging the loan, Believe Money is always available.

As an award-winning second-charge mortgage broker, we’re confident that we can help you find a deal that doesn’t compromise your existing mortgage. We work with people from all backgrounds and offer brokerage services to anyone, regardless of their credit score.

Zero upfront fees

Upfront fees are an issue with many brokers, and we completely understand that you don’t want to spend any money outright. We add our fees onto secured homeowner loans, so you won’t have to pay us anything until you begin making repayments on your loan.

Get a free homeowner loan consultation today

Whether you want to raise money for home improvements, schooling, or to consolidate existing debt, our dedicated team will ensure you have access to a range of loan providers.

Choosing us means you can save money and apply for a homeowner loan quickly. Please get in touch with us today if you’d like to learn more about our service.

How to apply for a homeowner loan online

Step 1.

Answer a few simple questions

Step 2.

We search our panel of lenders to find the homeowner loan that’s best suited for your circumstances

Step 3.

When you confirm your chosen homeowner loan, we get your application moving

Step 4.

The money lands in your bank
account – usually within two weeks

Common property loan questions answered

Can I get a homeowner loan if I don't fully own my property?

Generally, you need to have a significant amount of equity in your property to be eligible for a homeowner loan. If you have a mortgage, the remaining mortgage balance should be low enough to provide sufficient equity. However, it’s important to check with lenders as eligibility criteria may vary.

What is the difference between a homeowner loan and a mortgage?

The main difference is that a mortgage is the primary loan used to purchase a property, while a homeowner loan is an additional loan secured against the property. Mortgages typically have lower interest rates and longer repayment terms compared to homeowner loans.

What can I use a homeowner loan for?

Homeowner loans can be used for various purposes, such as home improvements, debt consolidation, funding a major purchase, or even starting a business. However, it’s important to use the funds responsibly and ensure that you can afford the repayments.

Are homeowner loans only available to homeowners?

Yes, homeowner loans are specifically designed for homeowners who have equity in their property. If you don’t own a property, you may need to consider other types of loans that are not secured against property.

Can I get a homeowner loan if I have bad credit?

Yes, we have access to lenders who specialise in homeowner loans to individuals with bad credit. However, the interest rates may be higher compared to those offered to borrowers with good credit. It’s advisable to shop around and compare offers from different lenders to find the most suitable terms for your circumstances.

Will getting a homeowner loan affect my credit score?

Applying for a homeowner loan may have a temporary impact on your credit report as lenders usually perform a credit check during the application process. However, if you make repayments on time and manage the loan responsibly, it can have a positive effect on your credit score over time.

Why Use Believe Money?

Believe Money is an award-winning finance broker dedicated to offering the best range of affordable loan options. Whatever your circumstances or credit rating, we’re committed to getting you the best secured loan interest rates by searching our entire panel of secured loan providers.

Whatever you need a secured loan for, we’re here to help. Our specialist advisors are available Monday to Friday, so if you need any help please contact us online or give us a call on 01302 591 360.

We compare homeowner loans from our panel of the UK’s top lenders to get you the best deal.


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