Homeowner Loans

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.

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.

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.

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.

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.

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.