What you need to know about homeowner loans
If you have a mortgage or own your home, getting a loan can often be easier than for someone who isn’t a homeowner. That’s because any loan is secured against your home. This makes you a lower risk for lenders so interest rates can be cheaper than unsecured loans.
Frequently asked questions
What exactly is a secured homeowner loan and how do they work?
A secured homeowner loan allows you to borrow a lump sum of money against your property. It means the loan is secured for the lender and they could repossess your home if there are problems paying back the debt. They can also be known as home equity loans, second mortgages or second charge mortgages.
You’ll need to make regular monthly repayments throughout the term of the loan, which could last anywhere between 1 to 35 years. If you don’t make the repayments, your home could be repossessed to pay off the outstanding debt.
Some homeowner loans charge an arrangement fee and have other set up charges.
With a secured homeowner loan:
- you can borrow against the value of your property up to a set percentage
- for the duration of the loan term you’ll have to pay interest
- you’ll need to pass credit and affordability checks
Our loan comparison service lets you compare loans up to £100,000.
Who are homeowner loans suitable for?
These loans are generally for homeowners or mortgage payers who want to borrow larger sums of money than they could with a standard personal loan.
Providers might want you to have built up equity in your home, (i.e. have paid off part of your mortgage or have a home that has gone up in value) so that the equity you have built up could be used to pay off the loan as well as any outstanding mortgage debt if you are unable to make repayments.
If you want to use your home to raise funds, remortgaging is a possible alternative.
What should I look out for when taking out a secured homeowner loan?
There are four things you need to understand before you take out this type of secured loan.
- If you fall behind or stop making payments on the loan the lender could take you to court and your house could be repossessed and sold to repay the debt.
- This kind of loan could have a variable interest rate so it can be difficult to budget your repayments, as the rate could go up or down as the market changes. And if you've also got a variable rate mortgage, you could get hit twice if rates go up, so it’s really important to make sure you would be able to afford your monthly repayments if they were to go up a few per cent.
- Some lenders make it hard to pay back secured loans, for example by imposing a penalty if you try and repay early.
- Some lenders make it clear that they won’t allow a ‘repayment holiday’ which is where you can request a break of a month or two if things are tight.
What does ‘total amount payable’ mean with a homeowner loan?
This shows you how much you will ultimately be paying back over the term of the loan. For example, paying back a £30,000 loan over 15 years might cost you over £40,000 in the end. But if you paid it back over five years, you might only pay £33,500.
So try and find a balance between affordable payments and a short repayment period to avoid paying more interest than you need to.
Can I get a homeowner loan if I have a bad credit history?
If you have a poor credit history, it can be tough to find a lender that will accept you. And if you’ve got into difficulty with debt before it might not be sensible to get a loan at all.
That said, a poor credit history doesn’t necessarily mean you can’t get a loan. Our loan tables have a number of providers that say they will ‘consider applicants with poor credit’.
So if you’re looking for homeowner loans, we can help you find a loan to meet your needs.
Always remember, though, that no matter how low the APR, loans always have a cost and there are risks, especially if you’re involving your home in the process. Tightening your belt and saving up is a far better option if you can. If you have debts, then before you decide on a homeowner loan get free debt advice.
How can I find a great homeowner loan for me?
The good news is that it’s really easy to compare all different kinds of loans with our comparison service. Just see our tables for the amount you want to borrow and compare instantly. Just see our tables for the amount you want to borrow and compare instantly.
Simply tell us:
- how much you want to borrow
- how much you can pay back each month
- how long you’d repay for
You’ll then see a table listing all the options. (No need for personal details.)
Results will be listed in order of lowest APRC first (Annual Percentage Rate of Charge) which is the total amount that the loan will cost you, including interest and charges.