A homeowner loan is a highly popular and secure way to finance your home and by ‘secured’ it means you need to keep up with your repayments or you’re at risk of losing your home.
But first, let's briefly understand what is homeowner loan and what it entails: A homeowner loan is a loan solely for the homeowner. You are allowed to borrow money against the value of your property provided it has accumulated equity over the years.
This type of loan allows you to borrow more money over a longer-term than you probably would when you remortgage, and it has a lower interest rate when compared to a personal loan. Homeowner loans are a better option compared to a remortgage because of the penalties that occur for repaying your current mortgage if your circumstances change or rates on your offer rise than what your current mortgage rates.
You can use a homeowner loan for anything such as consolidating your debt or home renovations.
When you understand that the property is used for collateral. Homeowner loans are often taken out in addition to an existing mortgage. This is known as a first charge, which means that the mortgage is the first borrowing against the property.The homeowner loan as the second borrowing becomes the ‘second charge’. This is what they really mean when referring to homeowner loans as the ‘second charge mortgages’ or ‘second mortgages’.
Another way to recognise them is the term “home equity loans”, since your home’s equity (the value of your interest in your home) is used as collateral.
When you have enough equity to qualify for a secured loan. There is a part of your home that you cannot borrow against.
The process of applying for a homeowner starts with an application just like a remortgage. A broker such as SmartMortgagesUK.com will easily help you find a lender that will help take you through all the necessary procedures whilst also considering your circumstances
Necessary documents such as bank statements, proof ID, proof of residence, and payslips should be ready and available. Have your property valued by an accredited property valuator.
Last thing you need to know and be aware of is affordability, lenders will decide whether to approve or not approve your homeowner loan, hence it’s best to make sure that you will be able to make your monthly repayments as there are risks that come with taking a mortgage
For more, speak to our experts and get a quote today.