Homeowner Loan Application Process
What Is The Homeowner Loan Application Process?
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Author: Gary Hemming CeMAP CeFA CeRGI CSP
20+ years experience in homeowner loans
Homeowner loans are a form of borrowing that allows you to use a property as collateral for your loan. While the security property is usually your home, some homeowner loans can be taken out against an investment property.
They’re also known as secured loans, second charge mortgages and home equity loans.
Homeowner loans allow you to borrow more money at lower rates due to the fact that the lender has security over your property.
While each lender has their own application process, most work in very similar ways. In this guide, we’ll break down exactly what the application process is and how long you can expect it to take.
What is the homeowner loan application process?
The process is simple and can be completed, and the funds in your account as a lump sum in as little as just a few days. The process is as follows:
- Understanding your monthly instalments – The first step is to use an online homeowner loan calculator to understand how much you’d like to borrow, the ideal loan term and homeowner loan rates that you can comfortably afford.
- Talk to a broker – A good homeowner loan broker will offer a quote, and explain the interest rate, potential fees and interest type, such as fixed rate, variable or tracker. If you’re happy with the quote, they’ll arrange a decision in principle to ensure your application is likely to be approved. This process takes just a few hours.
- Talk to your current mortgage lender – Talk to your mortgage lender to find out your outstanding balance, including any early repayment charges (ERC’s). Where possible, get an up to date mortgage statement.
- Submit your application – Your broker will fill out the forms and get together any required info, such as proof of income, proof of ID and address and potentially bank statements. The lender will then assess the documents and if they’re happy will issue a formal offer.
- Your loan is complete – Once you sign and return your offer, the loan application process is complete and you will receive your loan funds, usually as a lump sum into your bank account.
How long does the process take?
The homeowner secured loan application process can be completed very quickly, in anything from 3-21 days in most cases. Most loans take around 14 days to complete.
Homeowner loans take longer than unsecured loans, but complete faster than most other types of secured borrowing such as mortgages.
Some of the faster lenders may charge higher interest rates, as their speed is based on a simple application process with less questions.
In most cases, a valuation or solicitor is not required, which can dramatically speed up the process compared to other forms of secured finance.
What documents will I have to provide when I apply?
When applying for a homeowner loan, you will usually be expected to provide the following:
- A fully completed application form
- Proof of income (payslips for employed borrowers)
- 3 months bank statements
- Proof of ID and residence
- A mortgage statement (ideally, this isn’t always required)
If you’re unable to provide any of these items, let us know and we’ll be happy to advise on whether a lender would be happy to proceed without the missing item.
What should I consider before I apply?
Before applying, you should consider a few key points, including:
- Is the loan affordable – The first step is to ensure that your loan is affordable, both now and should things change in the future. Carefully consider the impact of future shocks such as a reduction in income, bills increasing or interest rates rising. While these may not happen, it is important that you are prepared.
- Will I need more money later – As its easier to get a second charge loan than a third charge, it’s better to tie up your borrowing needs in one go if possible. While it may not make sense to borrow funds now that won’t be needed for 5 years, it’s worth considering future needs over a shorter timeline.
- Is a homeowner loan the best option for me – Before applying for any credit, it’s important that you make sure it’s the best product for you. Carefully consider whether a homeowner loan is the best fit, or whether one of the alternatives to a homeowner loan would better meet your needs.
What is the best way to apply for a homeowner loan?
The best way to apply for a homeowner loan is through a broker.
A broker allows to you to compare homeowner loans from across the market to find the best deal quickly. Experienced brokers will have a strong knowledge of the market and deep relationships with lenders that enable them to secure you the best deal.
Of course, it’s important that you don’t get stung by high broker fees, with many brokers charging up to 12.5% of the loan amount (£5,000 on a £40,000 loan). At ABC Finance, we charge a low, fixed £1,495 fee no matter how much you borrow.
Should you choose to approach lenders directly, you could of course compare offers yourself, but would then be left to handle the application process on your own and will lose the benefit of receiving independent advice.
You may also find that some lenders won’t work directly with the public. To find out more, read how to get a homeowner loan.
