Home Equity Loans UK
Get a home equity loan without paying high broker fees. Get the best deal with ABC Finance.
Rated Excellent on Reviews.co.uk
Home Equity Loans at a Glance (as of April 2026):
- Representative APR: 6.5% to 12.9% depending on LTV band, credit profile, and type of product
- Typical LTV: Up to 80% CLTV (combined with your existing mortgage), but competitive rates are usually offered only at 60% or below
- Funding timeline: Credit-backed terms within 24–48 hours, but full completion between 4–8 weeks; broker and arrangement fees disclosed upfront before any application is submitted
Most large banks like Halifax, NatWest, and Santander only consider home equity loan cases where the borrower has a solid credit history, and the property is standard. But many times the requirement falls outside these strict parameters.
For cases where the borrower has a poor credit history or where their income structure is complex, you need to be able to access a separate market of specialist second charge lenders who are willing and able to deal with these situations.
ABC Finance offers a full spectrum service that connects you to the right lender for your case, be it high street banks or niche specialists, with the best possible terms applicable.
What is a Home Equity Loan and How Does it Work?
A home equity loan lets you borrow money against an existing property (or properties). In the UK, the common way to structure a home equity loan is to make it a second-charge mortgage. This means that your home equity loan becomes a secondary mortgage with lower priority than your primary home loan, but it is still secured against your home.
Since your home becomes the collateral for a home equity loan, you can borrow much higher sums at a more lucrative interest rate than a simple unsecured personal loan.
The money is paid out in a single lump sum, and repayment happens in monthly instalments, usually between 3 and 25 years.
The maximum loan amount depends on two factors:
- Current equity in the property
- Your income and ability to repay the loan
Lenders usually offer up to 80% of the property’s value, less any existing mortgages, as a loan. This is known as the combined loan-to-value (CLTV) of the property.
For example, if a property is worth £500,000, a lender willing to go up to 80% CLTV would cap the total secured borrowing against it at £400,000. If there’s already a £150,000 mortgage on the property, the maximum home equity loan available would be £250,000 (£400,000 cap minus the £150,000 existing mortgage).
The Difference Between Home Equity Loans and Equity Release
Despite similar-sounding names, these two products are meant for entirely different purposes.
A home equity loan (also known as a second charge mortgage) is a standard secured loan. You need to make monthly repayments against the amount borrowed, and it gets closed only when the term ends or the property is sold. In the UK, these products are regulated by the FCA.
Equity release is a loan against property offered to homeowners aged 55 and above. It is a way to unlock the equity of the property without needing to make any repayments. The interest keeps accumulating, and repayment only happens when either the person dies or is moved into long-term care. These products have a completely different regulatory framework from home equity loans.
How to Calculate Your Home Equity in 2026
Working out how much equity you have is straightforward:
Property Value − Outstanding Mortgage Balance = Your Equity
However, that entire equity is usually not available to borrow against. Lenders will only offer you up to 75% – 80% of your combined LTV. The remaining equity in the property must remain unencumbered.
For example:
- Property value: £400,000
- Maximum CLTV at 80%: £320,000
- Existing mortgage balance: £220,000
- Maximum home equity loan: £100,000
There are other factors involved, like your income and the lender’s assessment of your ability to service the debt. You can use our home equity loan calculator below to quickly assess your equity value.
Current Home Equity Loan Interest Rates
Home equity loan rates in the UK depend heavily on your credit history, loan size, LTV ratio, and type of loan – fixed or variable rate.
As of April 2026, with the Bank of England base rate at 3.75%, rates are usually in the range of 6.5% to over 8%. While top-tier borrowers can get rates of 6.5%-7.5%, lower credit tiers often secure rates above 7.5%, especially when opting for variable-rate loans.
Current Home Equity Loan Rates:
| LTV Band | Strong Credit (A-tier) | Standard Credit (B-tier) | Adverse/Complex |
|---|---|---|---|
| Up to 60% CLTV | 6.5% – 7.5% | 7.5% – 9.0% | 9.5% – 11.5% |
| 60%–75% CLTV | 7.0% – 8.5% | 8.5% – 10.5% | 10.5% – 12.5% |
| 75%–80% CLTV | 8.0% – 9.5% | 9.5% – 11.5% | 11.5% – 12.9% |
Source: Median UK lender quotes, April 2026. Rates are indicative and will vary by lender, individual borrower profile, loan size, and property type. These figures should not be construed as a mortgage offer or guarantee of available terms.
Fixed-rate loans have constant monthly repayments that do not vary throughout the term, while variable loan rates might change repayment rates in line with movements in the Bank of England base rates.
If you’re looking to take the loan for a specific purpose, such as remodelling a house or debt consolidation, a fixed interest rate might give you predictability in budgeting. Variable rates are useful if you anticipate early repayment, since these often carry lower early repayment charges.
At ABC Finance, we can help you choose the best possible rates available to you, depending on your credit history, LTV, and the specific need for which you are borrowing.
Home Equity Loan vs HELOC: Which is Better for You?
The standardised product called Home Equity Line of Credit (HELOC) is common in the US but uncommon in the UK. A small number of UK lenders offer an equivalent facility, sometimes called a secured line of credit or drawdown second charge. But it remains a niche product compared to the standard lump-sum home equity loan.
There are some differences between the two:
A HELOC-style facility is like a line of credit secured using your property. The lender assigns you a credit limit from which you can withdraw, repay, and then redraw as per your needs. It works similar to a secured overdraft facility, with interest being charged on the amount of overdraft drawn.
On the other hand, a home equity loan gives you a lump sum amount as a secured loan against your property, to be repaid over a fixed term, with a predecided rate (either fixed or variable).
Which of these is right for you depends on why you wish to borrow.
If the objective is to avail an ongoing line of credit to supplement your income or to manage rolling renovation over several phases, then a HELOC is a more suitable product.
If, instead, you need a single, large amount to do a major renovation or to consolidate your debt, then a home equity loan might be a better option.
Keep in mind that rates are typically higher for HELOCs due to the flexibility they provide. Moreover, there are very few lenders who offer this product in the UK.
For most borrowers in the UK, the debate on home equity loan vs HELOC usually tilts towards the former due to lower rates, simplicity, and easy access.
A whole-of-market broker like ABC Finance can assess your situation, suggest the best option for your specific circumstances, and help you identify the right lenders who are likely to approve your case.
Can I Get a Home Equity Loan with Bad Credit?
The short answer is yes, but having bad credit might limit the rates and options available to you.
While high street banks often decline such cases, there is a specialist segment of second charge lenders in the UK market that deals with home equity loans with bad credit applications.
These firms often employ a certain degree of human underwriting rather than a simple automated algorithm. They tend to look at the reasons behind the adverse credit.
Here are some of the things they consider.
What type of adverse credit was it?
A bankruptcy or an Individual Voluntary Arrangement (IVA) is fundamentally different from merely a single late payment four years ago. Similarly, defaults, County Court Judgements (CCJs), and other such situations are all dealt with separately to address the unique strengths or weaknesses of the case.
How old is it?
The ageing of adverse credit is important. Specialist lenders tend to be flexible for situations where the adverse credit is more than two years old, and even more so if it is three years or more.
Was the situation resolved?
If the CCJ was settled or the default has been satisfied, the lender might view the application more favourably.
What are the other strengths of the case?
Lenders tend to look at the case more favourably if the individual has a stable source of income, strong equity, and a credible reason for borrowing despite the adverse credit.
At ABC Finance, we can help you make your case to specialist second charge lenders who might view your situation more favourably, significantly improving your chances of finding a lender willing to say yes, at terms that are reasonable for your situation.
What Can You Use a Home Equity Loan For?
Here are some common reasons for taking out a home equity loan.
Home improvements
Kitchen and bathroom refits, loft conversions, energy efficiency upgrades, or putting in new roofing all require significant capital. Investing back into your property can help increase its market value, and taking out a loan to do so might make financial sense.
Debt consolidation
Due to their secured nature, home equity loans offer better repayment terms than unsecured debts like personal loans and credit cards. Using the funds from one loan to repay others can significantly lower your total monthly interest burden.
However, it is important to understand the implications of doing this kind of consolidation (see the section below).
Business funding
When you are running a business, you may sometimes need working capital for a variety of reasons, such as to buy equipment or to tide you over a temporary cash crunch. This is quite common for sole traders or small businesses. For such enterprises, availing of business loans might be difficult compared to a home equity loan.
Tax bills, legal costs, or other one-off expenses
Any time there is a large and unexpected outflow of funds, it might be better to avail a secured option at considerably favourable terms as compared to an unsecured loan that might be very expensive.
Purchasing another property
You might wish to use the equity from one home as a deposit on a second home meant for a buy-to-let purpose. However, this is usually not a desirable option.
Debt Consolidation vs Home Improvements
These two are by far the most popular reasons to take a home equity loan. However, it is important to understand the risk profile associated with each of them.
Home improvements
In this case, the capital borrowed will help increase the home’s value, which will make the loan worthwhile. As long as the project is properly planned and the repayments are affordable, the risk profile of home equity loans taken for this purpose is fairly low.
Debt consolidation
The logic of borrowing against a secured loan with a 6%-10% APR as compared to credit card debt at 20%+ APR is quite compelling. However, converting an unsecured debt to a secured one means that any default will cause the risk of losing your property.
Secondly, consolidation will work only if you are willing to put in the effort to end the underlying cause that led to the debt in the first place. So if you are into the habit of splurging on your credit card, you are bound to continue accumulating debt despite consolidating your debt.
Home Equity Loan vs HELOC for Debt Consolidation
A HELOC is like a flexible line of credit to be used as and when needed, whereas a home equity loan can help you consolidate all your existing unsecured loans under a single, secured umbrella.
If the goal of debt consolidation is to clear a defined set of debts, then clearly a home equity loan is a better choice. It promotes fiscal stability and discourages re-accumulation of debt. The revolving nature of a HELOC makes it work against the behavioural discipline required for debt consolidation.
Trust and Regulatory Safety
A secured lending product like a home equity loan should only be taken under the guidance of a firm that you can trust and that operates under the UK’s regulatory framework.
ABC Finance is authorised and regulated by the Financial Conduct Authority (FCA). As a whole-of-market broker, we search across the full range of UK second charge and home equity lenders—from mainstream high street providers to specialist lenders who focus on complex or adverse credit cases—to find the most appropriate deal for your circumstances.
We’re a broker, not a lender. As such, our interest lies in getting you the best deal. We offer a completely transparent fee structure where our broker fee is laid out upfront and agreed upon before submitting any application.
The FCA requires that all borrowers of secured loans be provided with a clear explanation of the risks involved, including the pitfalls of non-repayment. We take our responsibility very seriously. Our advisors ensure that you have a complete understanding of all features of the product before you opt for any product, including the costs, the term, and the consequences of non-repayment.
The figures and rate ranges in this article are indicative as of April 2026 and are subject to change. Your home may be repossessed if you do not keep up repayments on a mortgage or other loan secured against it. Always seek independent financial advice if you are unsure whether a secured loan is right for your circumstances.
