A homeowner loan is a form of secured borrowing. Because the loan is secured against your property, your home may be at risk if you cannot keep up repayments. Consider this carefully before applying.
If you are considering a homeowner loan to consolidate existing debts or cover a shortfall, speak to a free debt advice service first:
- StepChange — 0800 138 1111 — stepchange.org
- National Debtline — 0808 808 4000 — nationaldebtline.org
- MoneyHelper — 0800 138 7777 — moneyhelper.org.uk
What is a homeowner loan?
A homeowner loan is a type of secured loan where your property is used as security for the lender. If you cannot repay the loan, the lender may be able to take action that puts your home at risk.
The amount you may be able to borrow depends on the lender, your income, your existing mortgage, your property’s value, the equity you hold, your credit history, and the lender’s affordability checks.
To apply, you must own a property with equity — the difference between the property’s current market value and any outstanding mortgage. The amount you can borrow is generally based on:
- The value of your property
- Your income and outgoings
- Your credit record
- Your age and chosen loan term
- The lender’s maximum loan-to-value (LTV) limit
Different lenders accept different property types and may apply different criteria.
Please note: many lenders do not accept a caravan or mobile home as security for a homeowner loan.
Interest rates
There are three main types of interest rate structure for homeowner loans:
Short-term fixed rates — you pay a fixed amount of interest for an initial period, usually one to five years. After this period, your rate typically reverts to the lender’s standard variable rate, which may change over time.
Variable rates — the rate may change during the loan, usually linked to the Bank of England base rate or the lender’s own variable rate. Monthly payments may go up or down.
Fixed for term — the rate stays the same for the full life of the loan, making it easier to budget. This may come with a higher initial rate.
Fees
Homeowner loans can carry a range of fees that affect the total cost. Ask about all fees before proceeding, including:
- Valuation fees
- Legal fees
- Disbursement fees (such as land registry searches)
- Arrangement fees
- Broker fees (where applicable)
The APRC (Annual Percentage Rate of Charge) includes fees and is the most useful figure for comparing offers.
What to consider before applying
- Affordability — you will need to pass a credit and affordability check. Ensure the monthly repayments are affordable not just now, but if your income were to fall or expenses rise
- Loan-to-value (LTV) — lenders set a maximum LTV; the amount you can borrow is based on the equity in your property after any outstanding mortgage is deducted
- Rate type — understand whether your rate is fixed or variable, and what the repayment could be if rates rise
- Total amount repayable — always compare the total cost over the full term, not just the monthly payment
Example: if your home is worth £250,000 and you have an outstanding mortgage of £150,000, you have equity of £100,000. Your maximum borrowing will be limited to a percentage of that equity based on the lender’s LTV cap.
What happens during an application
After you apply, the lender will typically:
- Verify your income
- Review your credit record
- Confirm your property ownership and current value
- Assess affordability against your income and outgoings
This process typically takes several weeks. Once approved, the funds are usually transferred to your bank account.
Can you move house with an outstanding loan?
If you have an outstanding homeowner loan and wish to move, you generally have three options:
- Transfer the loan to your new property — this may incur a fee
- Use proceeds from the property sale to repay the loan — check whether this leaves enough for a deposit on your new home
- Repay the loan separately — check for early repayment charges first
Free help
If you are struggling with debt or unsure whether a homeowner loan is right for your situation:
- StepChange — 0800 138 1111 — stepchange.org
- National Debtline — 0808 808 4000 — nationaldebtline.org
- MoneyHelper — 0800 138 7777 — moneyhelper.org.uk
- Citizens Advice — citizensadvice.org.uk
Related guides: Secured Loans · Debt Consolidation · Personal Loans