Are you a homeowner who has been turned down for a personal loan? Have you thought about securing the loan against your property? Read on to discover the questions you should ask before choosing to take out a homeowner loan.
What is a homeowner loan?
A homeowner loan is only available to those who currently have a mortgage. This type of borrowing is sometimes referred to as a secured loan because the debt is secured against an asset, which can then be repossessed should repayments not be made. This reduces the risk to the lender, which may result in preferential interest rates, but presents a huge risk to the borrower who could lose their home if payments are defaulted.
How much can I borrow?
The amount of the loan granted can vary from lender to lender, but homeowner loans are usually up to the value of £100,000. Lenders feel more confident in granting loans to borrowers who are prepared to secure the credit against an asset.
How quickly must I repay my homeowner loan?
Due to the characteristically large amount of credit associated with a homeowner loan, its repayment can be spread across a term of up to 30 years. This lengthy term can mean that borrowers can benefit from low monthly interest rates, although be mindful that more interest will be paid overall.
Can a homeowner loan be repaid early?
Yes, there is the opportunity to repay a homeowner loan early, but doing so may incur an early settlement charge, which is added to the remaining balance at the time that a settlement figure is requested.
Our property is jointly owned, does this mean that the homeowner loan must also be in both names?
A homeowner loan is secured to the property rather than to the individual, which means that if the property is jointly owned, the credit rating of both owners must be taken into account. In addition to credit score, affordability will also be assessed to measure the monthly outgoings against the joint income.
My home is in negative equity; can I still apply for a homeowner loan?
Your chances of obtaining a homeowner loan may be affected if your home is in negative equity, or if the equity is less than 25% of the home’s value. You can seek guidance from The Money Advice Service, an independent service set up by the government to offer free impartial advice. The Money Advice Service can be reached on 0300 500 5000 or via their website: www.moneyadviceservice.org.uk