Home Equity Loan UK
Get a home equity loan without paying high broker fees. Get the best deal with ABC Finance.
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What is a home equity loan?
A home equity loan is a type of loan that uses your property as collateral for borrowing.
It sits behind your existing mortgage, meaning you won’t have to change your mortgage lender, and can be repaid over anything up to 25 years.
They’re often used to finance either home improvements or for debt consolidation. Our average saving per month for debt consolidation clients in the last 12 months is over £700 per month.
Home equity loans are also known as secured loans, homeowner loans or second charge mortgages.
How do they work?
A home equity loan works like a second mortgage on your property. One that sits behind your current mortgage, without the need to change it.
Home equity loans typically have lower interest rates than other types of loans, making them a great option for those who need to borrow money.
This is because lenders view your home equity as a low-risk investment since it is used as collateral.
You borrow a lump sum and then repay it over a fixed term, much like any other loan. The difference compared to a personal loan is that these loans can be repaid over a much longer period, meaning your monthly repayments will be lower.
Home loan rates & fees explained
As a whole of market broker, we can find the best deals in the UK and manage your whole application from an initial quote to the funds hitting your bank account.
What interest rate will I pay?
The lowest rate in the market is currently 5.69% for a 5 year fixed product.
The interest rate that you’ll pay will depend on your credit history, the lender chosen and your loan to value ratio.
The rates charged on second charge lending are slightly higher than first charge mortgage rates, but the difference is often not significant, especially on lower LTV loans.
What fees can I expect?
On top of the interest, most lenders charge a product fee when you take out a new loan. This fee can usually be added to the loan.
In most cases, the product fee, also known as the lender arrangement fee is around £1,000 – products with a higher fee usually come with a lower rate, and lower fees usually mean a slightly higher rate.
Will I be eligible?
If you’re a homeowner with sufficient equity and income, there is a good chance you’ll be eligible for this type of borrowing.
To find out whether you qualify, get in touch today and we’ll be able to guide you on your likelihood of approval within minutes.
Why work with ABC Finance?
At ABC Finance, we focus on our customers throughout the entire process – if we can’t make a market better, we won’t enter it.
The home equity loan market in the UK gives you two options – approach lenders directly and hope to find the best deal after hours of work, or use a broker that charges needlessly high fees. Many brokers charge 12.5% of the loan amount – £5,000 on a £40,000 loan.
That’s where we’re different, our fee is 5.5% of the amount borrowed – £2,200 on a £40,000 loan – a saving of £3,800 compared to many other brokers.
Cheaper doesn’t mean lower quality either – it just means fairer. We offer a 5 star premium service at a low price and there is no part of our service that’s scaled back.
We handle the whole application process for you, offer top quality customer service and work with the market’s leading lenders.
What are the main uses of home equity loans in the UK?
The main uses are debt consolidation and home improvements.
For example, debt consolidation can involve the repayment of unsecured loans, credit cards, store cards and any other debts that you may have.
Home improvement loans see you refinance your property to redecorate, replace the kitchen and bathroom, add an extension or undertake a full refurbishment without the need to remortgage.
Finally, we can offer loans for business purposes, either to fund a new or existing business.
As long as you can afford the payments each month, we can offer equity release loans secured against your property for almost any purpose, meaning we can help most borrowers.
What documents do I need to provide to apply for a home equity loan in the UK?
To get a home equity loan in the UK, you will be required to provide the following:
- Details of your property and mortgage
- Details and proof of your income
- Proof of ID and residency
- 3 months bank statements (in some cases)
How much can I borrow?
We offer loans from £10,000 with no defined maximum loan size.
The amount you can borrow depends on two factors, affordability and loan to value (LTV). Let’s break each one down further:
Loan to value
Loan to value refers to the percentage of borrowing against the property’s value. The LTV of home equity loans is considered to be the value of the loan plus the existing mortgage.
Most lenders allow a maximum LTV of 90%, meaning you can borrow up to 90% of your property value across your loan and mortgage.
Some lenders will push to 95% LTV, while a couple offer 100% LTV.
Usually, the higher the LTV, the higher the interest rate will be, especially once borrowing exceeds 90% of your property value.
Affordability
The second factor is affordability.
Each lender has their own method of assessing affordability for new loans, but in general, it’s possible to borrow a total of X times your income (when combining your mortgage plus your loan).
As each lender takes a different approach, the easiest way to check exactly how much you can borrow is to talk to an expert.
Our team will be able to give you a strong indication within minutes and can offer a full agreement in principle within an hour.
Will this type of finance affect my credit rating?
In the UK, home equity loans can have a positive impact on your credit rating, as long as you make the monthly repayments on time.
While your credit score may drop initially, as it often does when you take on new borrowing, it should improve over time as the repayments are made each month.
How quickly can my loan be approved?
We can approve your loan in principle within 1 hour of your initial enquiry. This will enable you to understand exactly how much you can borrow and how much it will cost.
For full approval and the loan to hit your bank account, this can be completed in as little as 3 days, although this varies depending on the chosen lender.
Some lenders are quicker than others, so where funds are needed urgently, there may be a trade off between securing the lowest interest rate and completing quickly.
Where this is the case, or advisors can help you to navigate the options available and to strike the right balance.
