Homeowner Loans
Take out a homeowner loan with ABC Finance and save thousands with our market leading 5.5% broker fee – capped at £2,195.
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Having your own home is a major asset. When you’re in need of a large sum of mone for a large one-time expense, a home renovation, or any other purpose, the true value of your home can be unlocked through a homeowner loan. Secured homeowner loans are often a more practical option than remortgaging a house whose existing debt has stiff early repayment charges or taking an unsecured loan, which might be much more expensive.
In the UK, high street banks like HSBC and Barclays don’t offer true homeowner loans. HSBC’s “Homeowner Loan” is a further advance available to existing mortgage customers, and Barclays exited the second charge market in 2016. The homeowner loan market is served by specialist lenders such as Together, Pepper Money, and Norton Finance, most of whom only accept applications through FCA-regulated brokers.
As a whole-of-market broker, ABC Finance helps you find the best lender pool that will be willing to offer you a homeowner loan at rates and terms that are in line with your circumstances. Our broker fee is capped at £2,195, regardless of how much you borrow.
Secured homeowner rates in the UK are available at rates between 5.69% to 20% APR, depending on factors like your equity within the property (after excluding any existing mortgage), your credit profile, and the loan amount that you want to take. Loans are available for amounts between £5,000 and £500,000, but in certain cases, lenders are willing to go even higher. Loan terms range between 3 and 30 years.
What is a Homeowner Loan?
A loan that is provided against your equity in your home is called a homeowner loan. As your home becomes collateral to the lender, the loan amounts can be higher, and the interest rates can be lower than those of an unsecured loan. But the tradeoff is that your home can be repossessed by lenders in case you are unable to make payments.
Homeowner loans are usually taken out when you need a large amount of money. Major home renovations, any large one-off purchases, a deposit for a second home, major life events such as marriages or business investments, and debt consolidation are typical examples of situations where homeowner loans are preferred.
How Homeowner Loans Differ from Secured Loans and Second Charge Mortgages
The terminology in this market can be confusing, so it’s worth clarifying the differences and similarities.
Secured loan is a broad term, referring to any loan where you put up an asset as security. The asset can be anything of value, but in the context of residential lending, it’s almost always a property. This is why the terms “secured loan” and “homeowner loan” are often used interchangeably.
Homeowner loan and second charge mortgage mean the same thing. The “second charge” simply describes the lender’s position: if the property is ever sold, your first mortgage lender is repaid first, and the second charge lender is repaid from whatever’s left.
Remortgaging is something entirely different. A remortgage replaces your existing mortgage with a new, usually larger one. But a homeowner loan sits alongside your existing mortgage, leaving its rate and terms untouched. This makes a homeowner loan particularly useful when you have a favourable rate on your first mortgage.
How a Homeowner Loan Works in Practice
A homeowner loan works just like any other mortgage. The lender provides you with a lump sum amount, which you need to repay in fixed monthly payments for a specified period. Both the first and the second mortgages exist together, and both repayments must be made as per their requirements.
At the time of providing the loan, the lender registers a second charge against your property at the Land Registry, where it gets recorded as a “second charge” lender. This gives legal rights to the lender in case there is any default in repayment.
What Funds Can Be Used for and Typical Loan-to-Value Ranges
Lenders do not put any restrictions on how the loan amount is used. But since the amount involved is large, these loans are typically used in situations like loft conversions, kitchen renovations, home improvements and extensions, large purchases like a second home, a motorhome or a car, major life expenses like weddings and children’s education, debt consolidation for those who have multiple high-interest loans running in parallel, business investment, and so on.
In the case of homeowner loans, Loan to Value (LTV) is calculated by deducting the balance of the current mortgage from the total value of the property, expressed as a percentage of the total property value.
It is impossible to get mortgage loans with no money down. Most lenders do not go higher than a combined LTV of 85%, but there are a few specialist lenders who may be willing to go higher. For the most attractive rates and offers, the combined LTV should be 60% to 70%. As you go higher, fewer lenders will be willing to take the case.
Let us look at an example of how combined LTV works in practice.
| Property Value | Existing Mortgage | Available Equity | Max Loan at 85% LTV | Max Loan at 75% LTV |
|---|---|---|---|---|
| £300,000 | £150,000 | £150,000 | £105,000 | £75,000 |
| £400,000 | £200,000 | £200,000 | £140,000 | £100,000 |
| £500,000 | £250,000 | £250,000 | £175,000 | £125,000 |
| £600,000 | £300,000 | £300,000 | £210,000 | £150,000 |
Figures are illustrative. The maximum loan available to you will also depend on your income, credit profile, and the lender’s individual criteria.
In addition to the LTV, lenders also look at your income and the amount you can comfortably repay on a monthly basis. Accordingly, even if the LTV is higher, the lender may restrict the loan amount if your income level is lower.
Rates, Fees, and Total Cost
There are several factors that impact homeowner loan pricing, including your LTV, your income, loan size, amount, term, credit profile, and more. Apart from the headline rate, there may be other fees applicable to your loan, so it is important to look at the final APR to compare offers.
Typical APR Ranges and Fee Structures
Depending on the factors mentioned above, secured loan interest rates in the UK usually range from 5.69% to 20% APR. Here are some indicative rates for various types of borrowers as of May 2026.
| Borrower Profile | Typical APR Range | Notes |
|---|---|---|
| Clean credit, 60–70% LTV | 5.69% – 8.0% | Widest lender panel, most competitive pricing |
| Clean credit, 70–80% LTV | 7.0% – 10.5% | Reduced panel, moderate premium |
| Adverse credit (CCJs, defaults) | 10.0% – 18.0% | Specialist lenders only; equity position critical |
| Heavy adverse/recent issues | 15.0% – 20.0%+ | Very limited panel; high equity required |
Rates are indicative as of May 2026. The Bank of England base rate is currently 3.75%. Your actual rate will depend on individual circumstances. These figures do not constitute a financial offer or advice.
Apart from the interest rates, lenders also charge an arrangement fee, which can be anywhere between £495 and £1,995. A valuation fee and legal charges are also applied in order to get a fair value of your property. These costs vary by region, but you should budget for anywhere between £300 and £600 in your total cost of borrowing.
Lenders may post misleading advertising showcasing lower APRs, without mentioning their large arrangement fees. Consider this: a £30,000 loan at 6.5% APR and no fees is actually better than taking the same loan at 5% APR but with a £2,000 fee. This is why it is always important to compare the Annual Percentage Rate of Charge (APRC), which gives a true comparison of the cost of loans.
Here is a worked repayment example at different loan sizes and rates:
| Loan Amount | Rate (APR) | Term | Monthly Payment | Total Repayable |
|---|---|---|---|---|
| £25,000 | 6.5% | 10 years | £284 | £34,080 |
| £50,000 | 7.5% | 15 years | £464 | £83,520 |
| £75,000 | 8.0% | 20 years | £628 | £150,720 |
| £100,000 | 6.5% | 20 years | £746 | £179,040 |
Figures are illustrative and based on capital repayment. Actual repayments will vary based on the rate you are offered and the lender’s specific terms.
Eligibility and Documentation
Even though the eligibility criteria for a homeowner loan are less stringent than those for unsecured loans, there are several checks and assessments that are carried out by lenders. The actual requirements vary by lenders, but the following are some that are common across most.
Credit, Income, Equity and Loan-to-Value Checks
Proof of property ownership
The first thing, of course, is proof of ownership of the property, along with your identification documents, proof of residence in the UK, and your age (lenders rarely offer loans to those above 80 years of age). In case the property is owned jointly, all owners become parties to the loan.
Equity position
Lenders commission a valuation to determine the actual market value of the property. From this, they reduce the remaining value of your current mortgage and arrive at the LTV figure.
Credit history
Due to the secured nature of the loan, it is easier to get homeowner loans for bad credit. Many specialist lenders offer secured loans in the UK to bad credit applicants who have had defaults, missed payments, or CCJs in the past. However, the rates offered are higher.
Income and affordability
Lenders use your income information to assess your ability to repay the loan on a timely basis. Employed applicants on PAYE are the most preferred, while self-employed and contract workers need to provide documentation to prove their income status.
Documentation checklist
Make sure you have all of the documents below before applying for a homeowner loan.
- UK passport/driving license as proof of identity
- Recent utility bill/bank statement as proof of address
- 2-3 months’ payslips (salaried) or SA302 and statement of accounts (self-employed) as proof of income
- Mortgage statement as proof of ownership of property
- 3-6 months bank statements
- Statements of any existing debts
- Information regarding the property that is useful for valuation, such as recent estimates or current market rates in the area
Regional Coverage and UK Context
There are certain regional differences for homeowner loans in the UK that are applicable across England, Scotland, Wales, and Northern Ireland, as mentioned below.
England, Northern Ireland, Wales and Scotland Considerations
England and Wales
Both England and Wales have the same legal framework for secured lending. Across both nations, lender criteria, conveyancing processes, and Land Registry registrations are similar. All specialist lenders operate in both regions.
Scotland
Scotland has a different system for lending, which falls under Scots law. Scotland has the concept of standard security instead of a second-charge mortgage. Moreover, all lenders that operate in England and Wales are not operative in Scotland.
The equivalent of a second charge mortgage in Scotland is a standard security, and not all lenders active in England and Wales extend their products to Scottish properties. Those that operate use slightly different criteria and timelines because of the differences in laws. Due to this reason, it is beneficial to use a broker for properties in Scotland who understands the nuances of Scottish secured lending.
Northern Ireland
The market for secured lending in Northern Ireland is considerably smaller than in England. Many specialist lenders do not even operate in this region. In most parts of Northern Ireland, property valuations tend to take longer than in England. Having a broker who is well-versed in the nuances of the region is extremely useful in this territory.
Broker vs Direct Lender
As already mentioned, true homeowner loans aren’t available from high street banks like Barclays and HSBC, as those banks only offer further advances to existing mortgage customers. The homeowner loan market is dominated by specialist lenders, most of whom either aren’t well known to the public or only accept applications through FCA-regulated mortgage and secured loan brokers.
Pros and Cons of Broker-Assisted vs Direct Applications
Homeowner loans from direct lenders
There are a few mainstream operators where it is possible to go directly. The advantage of doing so is that you avoid broker fees, which can be a considerable amount, especially when the loan value is small.
However, there are several disadvantages. Firstly, going directly to a single lender only exposes you to their specific products, interest rates, and loan structures. You do not get to choose the most appropriate loan from a bouquet of options, and end up paying higher than what you might have if you had gone through the broker route.
Using a broker
With an FCA-regulated broker, you get to experience the breadth of the lender market. You get to access even those lenders that will not be willing to consider your case if you approached them directly.
The broker will do a proper appraisal of your situation and match you to the lender that will be best suited for your situation. They will also ensure all documentation requirements are met, the application process is completed properly, and all information provided to the lender is correct.
Every application involves a hard credit check, so application rejections can impact your credit score negatively. Ensuring that your application is done properly reduces this risk significantly. Because our broker fee is capped (rather than charged as a percentage of the loan), the savings scale with the size of your borrowing.
We do a complete pre-application check, gather all details of the property, your mortgage balance, your income and employment details, credit history, and details regarding your preferred loan amount, term, interest rate, and type of product (fixed or variable rate). On the basis of this, we search for a lender that is best suited to your needs.
Calculators and Budgeting Tools
Modelling your numbers to determine the kind of monthly repayment amount, total cost of borrowing, and other details helps you understand the affordability of the new mortgage. Calculators and budgeting tools can be very useful for this purpose.
Using Homeowner Loan Calculators to Estimate Repayments
Before applying for a homeowner loan, it’s worth running the numbers through a homeowner loan calculator to get an idea of what monthly repayment you can comfortably afford and what the loan will cost you over its full term.
Using Our Homeowner Loan Calculator
ABC Finance’s free homeowner loan calculator lets you enter your loan amount, indicative rate, and preferred loan term to estimate your monthly repayment and the total cost of borrowing.
Monthly Costs
How to use our calculator:-
#1. Enter your loan amount
#2. Input the interest rate (either a whole number, or with decimal places).
#3. Enter the term of the required homeowner loan in years.
#4. Press ‘calculate’ and the calculator will show you your monthly payment.
Here’s a few tips for using it:
Use a realistic rate: If you don't know what rate you'll qualify for, use the midpoint of the relevant range from the rate table earlier in this article.
Look at total cost, not just monthly payment: A longer term lowers your monthly repayment but increases the amount of interest you'll pay over the life of the loan. Consider choosing the shortest term you can comfortably afford.
Remember the calculator doesn't include fees: Arrangement fees, valuation costs, and legal charges all add to the true cost of borrowing. You’ll want to factor these in when comparing options.
Once you have a working estimate, we can give you a precise figure based on the actual rates you'd qualify for.
Regulatory Guidance and Consumer Protection
The Financial Conduct Authority (FCA) governs all aspects of homeowner loans in the UK. These mortgages carry all of the same protections as first charge mortgages.
For example, under FCA rules, it is mandatory for lenders to perform thorough affordability assessments prior to recommending a loan offer. The lender must provide you with a European Standardised Information Sheet (ESIS), which gives you the complete terms of the loan, such as the total amount to be repaid, the APRC, and all fees.
Once the formal loan offer has been received, there is a 7-day reflection period provided to the borrower as a statutory right. It gives you time to reconsider all aspects of the loan before you go ahead and commit to it. There is no penalty or charge for withdrawing from the loan during this stage. Lastly, the loan cannot be completed until this period has passed.
The FCA has also instituted the Financial Ombudsman Service (FOS), which provides free and fair dispute resolution services. If you have a complaint or grievance regarding the lender or broker, you have the right to approach the ombudsman, who will consider all aspects of the case and give an independent and binding decision on all parties involved.
StepChange, National Debtline and Citizens Advice offer free and impartial advice regarding taking on debt of all kinds, including homeowner loans, to all residents of the UK.
Related Products and Alternatives
Apart from homeowner loans, there are several other products that can help you get access to a large amount of funds. Choosing the right option depends on your particular situation. We list some of these products below.
Remortgaging
You can choose to replace your existing home mortgage with a larger one by closing out the old mortgage and taking on a newer, larger one in its place.
This can be a good option if your existing mortgage does not have a large early repayment charge, or if your material situation, such as your credit score and income, has improved significantly since you took on the first mortgage. In this situation, you might be able to secure a larger debt at a lower interest rate and more favourable terms.
Further advance
Some mortgage lenders let you borrow additional funds against your existing loan, at a separate rate and term, but still secured against your property. Everything remains with the same lender, making the situation less complicated as regards documentation, application formalities, and fees. The disadvantage is that you do not get to compare offers from other lenders in this scenario.
Unsecured personal loans
If you do not wish to mortgage further equity in your home, and the amount you need is not unreasonably large (around £25,000–£35,000), some lenders will offer you unsecured personal loans. However, these loans usually carry a higher rate.
Equity release
Homeowners above 55 years of age can access equity in their homes directly without making any repayments, using a product known as equity release. This is very different from a homeowner loan and carries completely different costs, terms, and long-term implications.
Homeowner loans aren't a one-size-fits-all product. The right lender, rate, and structure depend on your equity, income, credit profile, and what you need the funds for. As a whole-of-market broker with a capped fee of £2,195, our role is to do the legwork and find you the best fit for your circumstances.
Frequently Asked Questions
Are homeowner loans a good idea?
A homeowner loan can be a sensible idea if you need to borrow large sums of money, have meaningful equity in your property, and have a clear purpose for the money you want to borrow. Examples of how people use homeowner loans are home improvements or debt consolidation. Because a homeowner loan is secured against your home, you usually get better terms than unsecured borrowing. The trade-off is that your home is at risk if you fall behind on your payments.
Can I get a homeowner loan with bad credit?
Yes, because the loan is secured against your property. Because of this, specific lenders are often willing to consider applicants with bad credit. However, the rates offered may be higher than those with clean credit records. Your equity position becomes very important, and typically, the more equity you have, the wider your options.
How long does a homeowner loan take to arrange?
It depends, but most homeowner loan applications can take about 3-6 weeks from initial enquiry to the funds being released. However, the timeline depends on the lender, how quickly your property can be valued, and whether all required documentation is provided.
Are there guaranteed approval or no-credit-check homeowner loans?
No. Any UK lender claiming to offer "guaranteed approval" or "no credit check" homeowner loans is either misleading you or operating outside FCA regulation. All legitimate lenders in the UK are required to carry out affordability and credit assessments before issuing a loan offer. Be cautious of any provider that promises otherwise.
Will my mortgage lender need to approve the loan?
Your existing mortgage lender will be notified that a second charge is being registered against your property and may need to provide formal consent. Most first-charge lenders are familiar with this process and rarely refuse, though some have specific conditions. Your broker will handle this consent process as part of the application.
The rates and figures shown in this article are for informational purposes only and do not constitute financial advice or a mortgage offer. Homeowner loan rates change frequently and will depend on your individual circumstances. Your home may be repossessed if you do not keep up repayments on a loan secured against it. For a tailored assessment of what's currently available to you, speak to our team at ABC Finance.
