How To Get A Homeowner Loan

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ABC FinanceHomeowner LoansHow To Get
Gary Hemming

Author: Gary Hemming CeMAP CeFA CeFA CSP

20+ years experience in homeowner loans

Getting a homeowner loan is a big step and can seem confusing. Many borrowers simply don’t know how to get a homeowner loan and also often ask us ‘what documents do I need for a homeowner loan?’

In this guide, we’ll break down how you can get a homeowner loan, the documents that your chosen lender will request, how the documents differ from an unsecured loan and some key points that lenders consider.

What is a homeowner loan?

A homeowner loan is a type of loan that is secured against the equity held in your home, or an investment property. As the loan is secured, you may be able to borrow more, at a lower interest rate than an equivalent unsecured personal loan.

This is because the lender faces a lower risk in the event of default, due to the fact that they have a charge against your property.

Homeowner loans can be taken up to £250,000, or even more, where there is sufficient equity in the property. This is in contrast to unsecured loans, which are usually capped at £25,000.

While this may all sound too good to be true, there is some risk associated with taking out a homeowner loan. Should you default on a homeowner loan, the risk of losing your home is higher than would be the case with a personal loan.

Who offers homeowner loans?

Homeowner loans are offered by banks and specialist lenders, including Shawbrook Bank, United Trust Bank and West One.

Finding the right lender for you can be tricky as each lender has their own range of products and their own lending criteria. For this reason, many borrowers choose to work with a homeowner loan broker.

When working with a broker, it’s important that you understand their fee structure early in the process. Some brokers charge fees of up to 12.5% of the loan amount – £6,250 for a £50,000 loan. At ABC Finance, we simply charge a low, fixed £1,495 broker fee when the loan completes. This would save you £5,255 in the above example.

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Is it easy to get a homeowner loan?

Yes, getting a homeowner loan is easy if you meet the lenders criteria. The homeowner loan process is very straightforward and far quicker than the mortgage process. Compared to unsecured loans, it’s far easier to qualify for a homeowner loan due to the fact that the risk to the lender is lower.

By offering security, you allow the lender to reduce their risk and offer you a better interest rate and more relaxed lending rules.

What to consider before taking out a homeowner loan

Before taking out a homeowner loan, you should consider the following things:

  • Is a homeowner loan the best option for you, or should you consider an alternative product?
  • Is the loan affordable, even if your circumstances change?
  • Are you getting the best deal, or could you save money by shopping around?
  • Do you feel 100% comfortable? You should never proceed unless the answer to this question is ‘yes’.

Once you’re satisfied with these points, you can tweak the loan further by choosing a fixed or variable interest rate and changing the loan term.

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What information does a homeowner loan lender need to know?

To confirm your eligibility for a homeowner loan, your lender will request the following:

  • Your full name, date of birth and full address.
  • Your employment details – company name, job title, your income and how long you have been in the role
  • Details of the security property – address, value, date built etc.
  • Details of your current mortgage – lender name, amount outstanding, monthly payment and account number.

Of course, this can vary from lender to lender and in some cases, more information may be required.

What documents are required to get a homeowner loan?

The documents required to get a homeowner loan are:

  • Proof of ID – passport or driving licence
  • Proof of address – a utility bill dated in the last 3 months
  • Proof of income – payslips, P60, or self-employment tax documents
  • A recent mortgage statement

Some lenders will allow scanned copies of these documents, as long as they’ve been certified by a suitable professional. Suitable professionals include mortgage brokers, solicitors and in doctors.

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How long does it take to get a homeowner loan?

It takes 2-3 weeks to get a homeowner loan. How long your application takes will depend on how complex your application is and how quickly you respond to lender requests for information.

In most cases, homeowner loan applications are made online, which can speed up the process. Again, in many cases, an online property valuation can be undertaken, which can reduce the time taken for your application to complete.

Homeowner loans take longer than unsecured loans due to the additional complexity of assessing the suitability of your property as security for the loan. Legal work and valuations are the key factors that can slow things down. While it’s always nice to tie things up quickly, taking the time to do things right will benefit you in the long run.

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