Homeowner Loans

All you need to know about Homeowner loans and how to secure the best possible rate

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: December 5, 2023

If you’re exploring different borrowing options and considering second charge mortgages, a homeowner loan could be the finance solution you’re looking for.

This guide covers everything you need to know about UK homeowner loans. We’ll explain how they work, when they can be a good idea, and how you can actually get this type of loan.

Keep reading for all the essential details or click on a link below to jump straight to a section…

What is a homeowner loan?

This is a financial product you can use to borrow money if you own equity in a property. The name gives it away, but it’s a loan designed for homeowners. It’s a secured loan and sometimes referred to as a ‘home equity loan’ because your house is used as security for the debt. This type of borrowing is also known as second charge lending or equity release loans (not to be confused, though with equity release schemes which are quite different).

How do they work?

In a very similar way to a second-charge mortgage. A valuation will be carried out on your house and then how much you’ll be able to borrow will be determined by:

  1. The lender you deal with
  2. Your personal finances
  3. The level of equity you own in the property

The amount of money you decide to borrow will then be paid back in monthly repayments with additional interest over an agreed period of time, usually between 1 and 35 years. Interest rates are normally fixed but there can be some flexibility for paying back faster. Also, there can sometimes be interest-only homeowner loans available.

Your property will be used as security for this new debt you’re taking on, which is why it’s classed as a secured loan. If you’re unable to pay back the lump sum borrowed, your home could be repossessed.


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How they’re different to first-charge mortgages

They are very different products. A regular mortgage involves borrowing to buy a house, whereas a homeowner loan involves borrowing against your house.

Rates are typically higher for homeowner loans, but maximum borrowing can be more flexible and based on higher income multiples if enough equity is held in the property.

Fees and costs

This type of borrowing does come with some added costs to consider, including:

  • Arrangements fees
  • Valuation costs
  • Broker fees
  • Potential early repayment charges

How to get a homeowner loan

The exact process will vary slightly depending on your personal situation but here are some straightforward steps to follow to get a homeowner loan in the UK:

  1. Gather your documents. Before you begin the process of searching for homeowner loans and researching rates, it’s a good idea to have all your relevant details to hand. You’ll need all the standard documents like photo ID, proof of address, plus at least 3 months’ worth of bank statements and payslips (or multiple years of accounts if you’re self-employed).It’s also important that you get hold of any details relating to your current mortgage. During this process, you’ll need to contact and notify your lender about taking out a homeowner loan. Also, these details can help your broker better assess your current finances to provide bespoke advice.
  2. Speak with a homeowner loan expert. We can help to match you to a dedicated broker who specialises in homeowner loans.
  3. Apply. After your specialist secured loan broker has assessed your finances, dealt with your existing mortgage provider, arranged a valuation and reviewed your credit reports – the next step involves applying for a homeowner loan.

If you’d like to discuss your borrowing options with an expert broker, we’ll introduce you to one for free. Just make an enquiry and we’ll arrange a call.

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Why secured homeowner loans are useful

Here are some of the key benefits of using a secured loan and why homeowner loans can be a good idea:

  • Borrow large amounts – a homeowner loan can let you borrow a bigger sum than you can with something like a standard personal loan.
  • Debt consolidation – if you’ve got existing debts like credit cards and unsecured loans, this can be an effective way to pay them off and consolidate everything onto a lower interest rate.
  • Home improvements or renovations – using a homeowner loan to carry out costly improvements to your property can be a good idea and may end up increasing the value of your home.
  • Poor credit – if your credit rating has taken a hit since your first mortgage, using a homeowner loan can be more financially efficient than doing a full remortgage at potentially higher rates.
  • As an alternative to remortgaging – Some homeowners are unable to remortgage, either because they are locked into a fixed rate or not eligible. Others might not want to refinance, but the good news is that secured loans can be a viable alternative for capital raising.

Lenders and rates

If you’re curious to know about some of the lenders who offer secured loans, here are some examples of popular major borrowing options:

  • Barclays – these will fall under the category of ‘home finance’.
  • Nationwide – often split into different products with different rules and terms depending on what you want to use the funds for.
  • Shawbrook Bank – offer competitive homeowner loan rates, but they come with an expensive product fee.

The interest rates for this type of lending can vary quite dramatically. If you want to find the cheapest homeowner loans for your situation, guidance from an expert broker is essential. They’ll have access to the whole market and introduce you to the lender with the best rates.

There are also generic comparison sites, for example, Ocean Finance homeowner loan reviews are mostly positive on Feefo. But, broad comparison sites don’t have the tools to properly assess your finances or provide access to every option. Also, using an online homeowner loans calculator gives you a rough idea but they’re not completely accurate.

Can you get homeowner loans with bad credit?

Yes, this is definitely possible. However, adverse credit could mean that you’re offered less competitive rates by some lenders. Also, there are lenders who will only offer you homeowner loans with a lower loan-to-value (LTV) ratio if you have bad credit.

It’s well worth discussing your current situation with an experienced broker because they’ll be able to help arrange homeowner loans for applicants with poor credit. This could involve reorganising your finances or approaching specific bad credit lenders to make sure you end up with homeowner loan rates you’re happy with.

What about if you’re self-employed?

If you’re self-employed, you’ll still be able to get a homeowner loan if you deal with the right lenders. However, some of the requirements will likely be different. In most cases, you’ll need to be able to provide up to three years’ worth of certified accounts.

Some lenders will consider offering a homeowner loan if you’ve been trading for less time, but you’ll likely need a respectable broker to introduce you to the small number of lenders willing to discuss more flexible terms.

Remortgaging with a second charge loan

If you have an active second charge homeowner loan on your property, remortgaging is still a possibility. But, lenders will take this debt from the secured loan into account when assessing your application and calculating affordability. This will likely mean a smaller pool of lenders willing to offer you a competitive remortgage deal.

Remortgaging with a second charge means passing a new set of affordability assessments and checks based on your current circumstances. So, your homeowner loan repayments would factor into a lender’s review of your remortgage application.

Get matched with a specialist homeowner loan broker

If you want to get set up with the cheapest homeowner loans with the most competitive rates for your circumstances, speaking with a specialist secured loan broker is your best move.

We offer a free, broker-matching service. This means we’ll quickly assess your mortgage and borrowing needs, then pair you up with an experienced broker.

Just call 0808 189 2301 or make an enquiry. We’ll set up a free, no obligation chat between you and your ideal broker today.

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Yes, this is possible but it can be viewed as a higher risk for some lenders. As a result, certain lenders will charge higher interest rates, put in place LTV caps, or have stricter affordability checks you’ll need to pass. Things can get complex, but an expert broker will introduce you to the most suitable lender if you want to borrow again against your buy-to-let property.

If you own a property outright, it’s still possible to borrow against it and use the asset as security for a loan. But, if you don’t own a house or have a mortgage, you’ll need to explore other lending options instead of homeowner loans. This could involve alternatives like unsecured personal loans and credit cards (typically if you’re only wanting to borrow up to £25,000).

This process can often take between 2-4 weeks, but it will vary between lenders. Sometimes a faster homeowner loan can be obtained by going direct to a major bank or by dealing with your current lender, but this is likely going to reduce your chances of getting a top deal.

If you want the cheapest rates for homeowner loans, your best bet is to take a little extra time and explore the whole array of options with a specialist broker.

The amount can range from as little as £1,000 up to as much as £2.5 million. But, the amount you can borrow will depend on your personal circumstances and the value of your property.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

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Pete Mugleston

Mortgage Advisor, MD

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