Homeowner Loan Scotland
How To Get A Homeowner Loan In Scotland
Get the best deal on your homeowner loan in Scotland with ABC Finance and save thousands in broker fees!
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Author: Gary Hemming CeMAP CeFA CeRGI CSP
20+ years experience in homeowner loans
A homeowner loan allows you to borrow money using the equity in your home or an investment property.
At ABC Finance, we offer a whole of market homeowner loan broker service with a low, fixed £1,495 broker fee. Compared to a typical broker with a 12.5% broker fee, we can save you £3,505 on a £40,000 loan.
What is a homeowner loan?
A homeowner loan is a type of property backed loan that enables you to borrow money against the equity in your home or an investment property (known as buy to let homeowner loans).
Almost any property can be used to borrow money with homeowner-secured loans, as long as it has sufficient equity to meet the lenders criteria.
They’re known by a number of names in Scotland, including secured loans, home equity loans and second charge mortgages.
Common uses in Scotland include raising funds as homeowner loans for debt consolidation (often refinancing unsecured debts) or homeowner loans for home improvement.
Read more – Homeowner loans in England or Homeowner loans in Northern Ireland.
How do homeowner loans work in Scotland?
Secured homeowner loans work by releasing equity from your property.
The funds are released to you as a lump sum and then repaid through monthly repayments, much like how a mortgage is paid.
Homeowner loans offer much longer loan terms than unsecured personal loans, with the loan term usually being between 10-25 years. A longer term will reduce the monthly cost of borrowing but will increase the total interest paid, whereas a shorter term reduces total interest, but increases the monthly cost.
The amount you can borrow is decided based on key homeowner loan lending criteria. Specifically, your maximum loan is decided based on your property value, the proposed loan to value ratio, your credit score (or credit history) and the lender’s affordability guidelines.
The bigger the gap between your property value and mortgage balance, the more you can borrow (as long as you meet the lender’s affordability criteria).
Read more – homeowner loans in Wales or homeowner loans vs HELOCs.
Can a homeowner loan be used as a replacement for a remortgage in Scotland?
Yes, a homeowner loan is a replacement for a further advance or remortgage from your existing mortgage lender.
Should your existing mortgage lender decline to offer further borrowing, or offer less than you’d like to borrow, a home loan is a great alternative.
Why are homeowner loans in Scotland Popular?
Homeowner loans are popular due to their simple homeowner loan application process and flexible lending criteria.
The ease of taking out a loan makes them popular with borrowers who want a fast and simple application process that can be completed quickly.
Furthermore, as homeowner loans allow you to borrow money over a longer loan term, they’re a strong option for borrowers who are looking for low monthly repayments.
Home loan lenders allow you to borrow anything from £10,000 to £500,000 (or even more in some cases).
For this reason, they’re very popular with borrowers who want to borrow more money than would be possible using an unsecured personal loan.
Read more – What happens if I default on a homeowner loan? or How many homeowner loans can I have?
What can a homeowner loan be used for?
In Scotland, homeowner loans are used to release equity from your property.
While they can be used to raise funds for almost any purpose, common uses include:
- Debt consolidation
- Home improvements
- Funding large purchases
- To fund property investment
- Business investment
- To fund school fees
How can I get a homeowner loan in Scotland?
Using a reputable homeowner loan broker is the easiest way to get a home loan in Scotland.
An experienced broker will search the whole market to find the best deal for you.
When choosing which broker to work with, you should always consider the cost of broker fees. Many brokers charge up to 12.5% of the loan amount – which means £5,000 on a £40,000 loan!
At ABC Finance, we offer a 5 star service with a market leading, fixed £1,495 broker fee to help save our clients money.
Homeowner loans for homeowners in Scotland
An example of how a homeowner in Scotland could use a homeowner loan:
- You want to borrow £40,000 by releasing the locked-up equity from your property to fund home improvements.
- Your current mortgage balance is £200,000 and your property value is £400,000.
- You secure funds to fully redecorate your property, including installing a new kitchen and bathroom.
- This raises your property value to £500,000, giving you a £50,000 profit and an improved standard of living.
In Scotland, the maximum loan amount is up to 95% loan-to-value, so 95% of your property value, minus your existing mortgage balance.
How quickly can you get a homeowner secured loan?
A homeowner secured loan can be arranged in an average of 3-14 days, making it a strong option for when you need to borrow money quickly.
Most loans can be completed without the need for a physical valuation by a RICS surveyor, or the need to work with a conveyancing solicitor. This makes the application process far quicker than other similar products such as a mortgage.
How much can I borrow with a homeowner loan in Scotland?
You can borrow anything from £10,000 to £500,000 using a homeowner loan.
The maximum loan amount depends on your property value, loan to value (LTV), chosen lender and your ability to meet your lenders affordability criteria.
Lending is usually limited by the maximum LTV or affordability rules.
Our team of experienced homeowner loan brokers can calculate your maximum loan and offer a quote within 1 hour.
Alternatively, to understand your likely monthly repayments, try our homeowner loan calculator.
Homeowner loan requirements
To get a homeowner loan in Scotland you must meet the following criteria:
- Be a homeowner
- Not exceed a maximum of 95% LTV (based on your new loan and existing mortgage)
- Meet the lender’s affordability criteria
- Provide the required documents needed to get a loan (usually proof of ID, income and bank statements)
Read more – Homeowner loan vs HELOCs or How many homeowner loans can I have?
How much does a homeowner loan in Scotland cost?
The cost of a homeowner loan is made up of 2 factors – fees and interest.
The first, and greatest cost is the cost of interest. Homeowner loan interest rates start at 5.99% and are usually between 5.99% and 9.99%.
Your interest rate is decided based on which lender you choose, LTV, your choice of a fixed rate homeowner loan or variable and your credit history.
The next factor is the cost of fees. There are several fees to pay when taking out this type of loan, although most can be added to the loan.
The main fees to consider are:
- Lender arrangement fee – This fee, also known as a product fee is charged as part of the setup of the loan. In some cases, there is a trade-off between paying a higher arrangement fee to secure a lower rate, or minimising fees at the expense of a higher rate. This fee can usually be added to the loan.
- Valuation fee – Valuation fees are payable where a valuation is required. The fee generally covers a basic survey of the property. In many cases, we can proceed using only a desktop or automated valuations (AVM), there is usually no charge for this and it has the advantage of being instant.
- Broker fee – Broker fees are a hot topic in the homeowner loan market. Many brokers charge high fees, often 12.5% of the loan amount. While this can be added to the loan, paying a high fee will increase your monthly repayments and result in significantly more interest being paid over time (interest is charged on any fees that are added to the loan). At ABC Finance, we charge a fixed £1,495 broker fee, saving our clients an average of £2,880 (based on a £35,000 loan)
How is a homeowner loan repaid in Scotland repaid?
Homeowner loans are repaid through monthly repayments over the fixed loan term.
Almost all home loans are arranged on a capital repayment basis, meaning the loan is repaid through the monthly payments, which are made up of both capital and interest. Should you opt for early repayment of your loan, this won’t usually be a problem. Many borrowers choose to refinance their homeowner secured loan and combine it with their mortgage when they remortgage their property.
FAQs
Can I get a fixed rate homeowner loan in Scotland?
Yes, fixed rate homeowner loans are a popular option for borrowers in Scotland who are looking for certainty that their monthly repayments won’t increase during their promotional rate period.
It’s important to note that many fixed rate products come with early repayment charges (ERCs) during the fixed rate period (although we can offer products without ERCs or penalties for early repayment).
Can I get a homeowner loan if I have bad credit?
Yes, we offer a specialist range of bad credit homeowner loans for borrowers with a poor credit score or bad credit factors.
Bad credit such as CCJs, defaults, missed payments, previous bankruptcies or previous mortgage arrears isn’t necessarily a problem when applying for a homeowner loan against your property.
Read more – Homeowner loans for self-employed applicants or Will my mortgage lender let me take out a homeowner loan?
Are homeowner loans FCA regulated in Scotland?
Yes, homeowner loans are regulated by the Financial Conduct Authority (FCA) in Scotland.
The FCA only regulate loans secured against a property that you have ever, currently, or plan to reside in as your primary residence.
The exception is loans secured against your home, which are to be used solely for business purposes. These loans are unregulated, although as an FCA regulated homeowner loan broker, we will still offer you the same high level of customer service, even on unregulated loans.
