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A homeowner loan may be worth considering if you own a property and need to borrow a large amount, though there are risks to consider too. Read on to learn more about homeowner loans, including whether one may be right for you.
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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a loan or any other debt secured on it.
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You must be a homeowner to apply for a Secured Loan via Norton
If you’re not a homeowner and would still like to search for a personal loan, then you can try searching for an unsecured loan via our loans eligibility service with Monevo.
How do homeowner loans work?
A homeowner loan is another name for a secured loan where the amount you borrow is secured against your home. In other words, your home acts as security for the loan, which minimises the risk for the lender but increases the risk for you – the main one being that you could lose your home if the loan goes unpaid.
You will need to either own your property outright or hold some equity and be paying a mortgage on the remaining value to get a homeowner loan. The total value of the property and the amount of equity you own will determine the size of the homeowner loan you can get.
As with other loans, factors, such as your credit score, income, and your age, will also affect your eligibility for a homeowner loan.
If your application is approved, you will repay the loan in monthly instalments. Bear in mind that homeowner loans may have variable interest rates, which means your monthly payments could change.
When you apply for a homeowner loan, more in-depth checks will need to be made to determine the value of your property and your ownership of it – something that won’t happen if you apply for an unsecured loan.
» MORE: How are secured and unsecured loans different?
How much can you borrow?
Homeowner loans are often used to raise larger sums of money, perhaps to fund home improvements, major purchases, or to consolidate debt.
Minimum loan amounts often start around £5,000 to £10,000, with maximum amounts sometimes as much as £1 million or more. Ultimately, the amount you can borrow will depend on your financial circumstances and the amount of equity you have in your home. You will only be able to borrow up to a certain percentage of the amount of equity you own. For example, if your property is worth £200,000 with £80,000 left to pay on your mortgage, lenders will only offer loans worth up to a certain percentage of the £120,000 you own.
» COMPARE: Best secured loans
Pros and cons of secured homeowner loans
| Pros | Cons |
| Interest rates may be lower than unsecured loans. | You risk losing your home if you cannot keep up with repayments. |
| Loan amounts tend to be larger than with an unsecured loan. | If you choose a variable rate loan, interest rates and therefore your repayments could increase. |
| Repayment terms are often longer than on other loans. | If you’re consolidating existing debt, you may end up paying more in interest overall. |
| The presence of security may make it easier to get a homeowner loan than other types of loan. | It may include expensive arrangement fees and other charges. |
What happens if you can’t repay a homeowner loan?
It’s vital to understand that your home is at risk if you miss repayments on a homeowner loan. If the loan goes unpaid, your lender could take possession of your property to get back what it is owed.
If you think you may miss a repayment on a homeowner loan, talk to your lender straight away. They may be able to offer some options, and there are certain steps that would need to be happen before you lost your home. But ultimately, your property could be taken.
» MORE: What to do if you’re struggling with secured debt
Alternatives to homeowner loans
Some potential alternatives you may want to consider before taking out a homeowner loan include:
Remortgaging: Instead of securing a separate loan against your property, it may be possible to borrow more on your current mortgage or remortgage to release equity from your home.
Unsecured personal loans: If you don’t need a large loan amount, you could explore a personal loan, particularly as it won’t put your property at direct risk.
» COMPARE: Best personal loans
WARNING: Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a loan or any other debt secured on it.
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