Homeowner Loans

Homeowner Loans are loans that are secured on a homeowner’s property and are also known as a secured loan or a Second mortgage. Homeowner Loans are designed for people who usually want to borrow larger sums of money for a variety of reasons such as home improvements, raise a deposit for another property or debt consolidation. Here we explain in more detail what homeowner loans are and why people take them out

Why would someone take out a homeowner loan?

There can be a variety of reasons why a secured homeowner loan is the right option for people such as:

• You may want to make home improvements – maybe you want a loft conversion, new kitchen or an extension and you need to borrow a larger sum of money to afford this.
• You may need to consolidate your debts such as loans &/or credit cards to reduce your outgoings.
• You may want to capital raise for other purposes such as a deposit to purchase another property, or maybe buy a new car.
• Maybe you want to borrow money over a longer term say 5 – 25 years to keep the monthly payments lower and more affordable.
• Maybe you have bad credit registered and other forms of borrowing are not possible, so a secured homeowner loan is a way to borrow the money you need.

How much can you borrow with a homeowner loan?

When looking to take out a secured homeowner loan how much you can borrow will depend upon many factors such as:

• How much you can afford to borrow. A full income and expenditure assessment will be completed to confirm the amount you wish to borrow is affordable to you now and in the future.
• How much equity (the difference between the property value and the existing mortgage debt) you have within the property. If you have sufficient equity homeowner loans can range from £15,000 to £500,000.

What are the types of rates available for secured homeowner loans?

Homeowner loans are offered with different payment profiles that may include fixed term interest rates over an initial period of 2 / 3 or 5 years, thus guaranteeing the monthly repayment for that period, or variable rates whereby the homeowner loan tracks the Bank of England base rate or is a discounted variable rate – both of these variable rate options could result in your payments going up or possibly down.

Homeowner loans are repayment loans typically, which means that the amount of the loan plus interest is paid back over the loan period. At the end of the term, all of the loan is paid back.

Homeowner loans bad credit – Is this possible?

As this is a loan secured against a property lenders tend to be more lenient with people who do not have an excellent credit rating. If you do have a low credit score &/or bad credit registered such as missed payments, defaults, county court judgements, IVA – there are lenders that can help. As previously mentioned how much you can borrow is based upon your affordability and how much equity you have within the property.

What other ways can you borrow money?

If you are considering borrowing money you should always review all your options to enable you to make the right decision going forward. There are other ways you can borrow money such as:

• Personal Loan – These are generally provided by the high street banks and you can borrow from £500 to £25,000 over a term of 1 – 5 years. Typically you will need a good credit profile to qualify for them and with these types of loans the fees involved to arrange can be minimal.
• Remortgage – This maybe a new mortgage with your existing lender or a remortgage with a new lender and you borrow the additional money you want.
• Further Advance – This is a 2^nd mortgage you take out with your existing lender.

Working with a mortgage advisor can be really beneficial as they can provide you with quotations from the market place and give you some advice around the pros and cons of each option.

Can you get a homeowner loan on different property types?

Yes – Whether you have a house or a flat or if the property is of non standard construction lenders can provide secured homeowner loans providing you pass their affordability tests and you have equity within the property.

Can you get a homeowner loan on a buy to let property?

If you own a buy to let property, some lenders can provide secured loans on these types of properties. If the buy to let property is let on a standard AST or it is a HMO or owned in an SPV, there are specialist lenders accessible through brokers who offer loans to help clients.

What fees and costs are involved with a secured homeowner loan?

When compared to a personal loan there are more fees and costs involved, so here we have broken down these down for you:

• Valuation Fee – This is a fee generally payable upfront. The cost depends upon your property value and whether you pass for an online valuation, drive-by valuation or if a full inspection valuation is needed.
• Lender Arrangement Fee – This can be a set amount or a percentage of the loan amount you are borrowing.
• Interest Rate – This is the amount you are being charged to borrow the money over the term of the loan. A good figure to look out for is the Annual Percentage Rate (APR) – This is the cost to you each year for borrowing the money including associated fees.
• Broker Fee – You broker should advise you of this amount and when payable.
• Redemption Fee – During the initial term of the secured homeowner loan you may have to pay a redemption fee if you redeem the loan within the initial fixed or discounted period.

Whether you have a good credit profile or are looking for a bad credit homeowner loan the above fees are a good guide for you. You advisor should provide you with an illustration detailing all the associated fees/costs and when payable.

What documents are needed for a homeowner loan?

Typical documents required by your advisor and the lender include:

• Proof of income – If employed this is your last 3 months payslips and P60 or if self employed this is your accounts, tax calculations and tax overviews.
• Bank Statements – Generally you need to provide your last 3 months bank statements
• Proof of Identity – This is your passport &/or driving license.
• Credit Report – A Checkmyfile report is ideal as it shows your credit data from 3 agencies that lenders refer to being Experian, Equifax and Transunion.

There may be additional forms / information that is needed based upon the lender you use and to pass the underwriting of the application. Additionally if you are looking for a bad credit homeowner loan a full explanation will be needed around why the bad credit occurred.

How do I explore my homeowner loan options?

You can either call us on 02037255830 or complete the above enquiry form and you will then be able to schedule a call with an advisor.