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What Are Home Equity Loans?

Home equity loans are loans that allow you to borrow against the equity that you have in your home.

Your equity is the difference between the value of your property and the value of any mortgages and secured loans secured on it. For example, if you house is worth £150,000 and you have a £50,000 mortgage then you have equity of £100,000.

As a home equity loan involves you offering your property to the lender as security, the interest rates charged on homeowner loans are often lower than on unsecured loans or credit cards. You should bear in mind however that unlike unsecured credit, your home is at risk if you don’t keep up repayments to your home equity loan.

A home equity loan is typically separate to your main mortgage which is why it is sometimes called a ‘second mortgage’. Your mortgage lender takes a first legal ‘charge’ over your home while the secured lender takes a ‘second charge’. This means that interest rates are sometimes higher on secured loans than on mortgages as the lender is second in the queue to recoup their money should you fail to keep up your repayments.

You can typically borrow any amount from £3,000 to over £100,000 (depending on the equity in your home) and spread your repayments over a term of 3 to 25 years.

You can use home equity loans for a wide range of purposes. One of the most popular reasons that people take out a home equity loan is to make improvements to their property. You can use a homeowner loan to pay for a range of home improvements from a new bathroom or kitchen to the landscaping of your garden. You may also want to convert your loft or build an extension or replace your roof, windows or boiler.

Many people also use a home equity loan to consolidate other debts that they have. You can borrow against the equity in your property in order to repay credit cards and personal loans. This can not only save you a considerable amount in interest charges but also significantly reduce your total monthly outgoings.

Alternatively, you can use the proceeds of a home equity loan to fund a large expense such as a wedding or university fees. You can also use it to buy a high value item such as a new car or an item of jewellery.

To access the money tied in your home equity and get a great loan rate, fill our loan form on the right now.