Home Owner Loans
Homeowner Loans, or Secured Loans as often called, are an option worth considering for homeowners seeking to finance various needs. These loans utilise the equity in your home as collateral and can range from £5,000 to £1,500,000. Before you apply, let’s dive into how they work and what they could mean for you.
Understanding Secured Loans
Secured Loans could be a viable option for homeowners with an existing mortgage. They offer a chance to tap into the equity in your home to secure financing. Sound complex? Well, our experts are here to help you understand everything about homeowners loans in a simple, easy-to-read way:
Here’s a simple example:
Consider a house valued at £200,000 with a remaining mortgage balance of £125,000. The difference, or ‘equity’, is £75,000. This equity is what a Secured Loan taps into. A lender offering a 90% Loan-to-Value (LTV – a term referring to the ratio between the loan and the asset’s value) would comfortably lend up to £180,000. Subtracting the existing mortgage of £125,000, the potential loan could be £55,000.
Homeowner loans in the UK – The scope trend and risks
FamilyMoney Experts examined numerous authoritative sources in the UK to bring you the most important statistics related to homeowners’ loans in the UK. These statistics highlight UK homeowners loans scope, trends, and potential risks. Please note that some of the exact numbers might vary due to continuous changes in the financial market.
Resource we use to bring you the key facts:
Bank of England: The UK’s central bank regularly provides vital financial statistics and reports.
UK Finance: A trade association for the UK banking and financial services sector. It provides comprehensive data and statistics related to UK finance.
Office for National Statistics (ONS) The UK’s largest independent producer of official statistics. It provides a wide range of economic, social and demographic statistics.
UK homeowners loans scope, trends, and potential risks
- Total Volume of Homeowner Loans: The total outstanding value of all homeowner loans. £1.5 trillion.
- Average Loan Amount: The average loan amount taken by a homeowner in the UK was £30,000 (2022)
- Number of Outstanding Loans: The number of ongoing homeowner loans in the UK is 11.1 million (Q3, 2022)
- Default Rate: The percentage of homeowners who failed to make loan payments is 1.25% (Q4, 2022)
- Interest Rates: The average interest rate charged on homeowner loans was 2.9% (2022)
- Loan-to-value (LTV) Ratios: The ratio of the loan amount to the appraised value of the property. Average max LTV: 75% (2022)
- Growth in Loan Amounts: The increase in homeowner loan amounts over time was a 3.9% increase (2020 to 2021)
- Purpose of Loans: The main reasons homeowners take out loans are: Home improvement: 61%, Debt consolidation: 28%, Other purposes: 11% (2022)
- Equity release: A report by the Equity Release Council showed that around 76,154 new and returning customers opted for equity release, amounting to over £3.89 billion. The Telegraph’s Article on “Mortgages and home.” explains this topic in simple language.
How Secured Homeowner Loans Work
Learn
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Benefits of the Home-Owners Loan
- A secured loan interest rate is much lower in comparison to unsecured credit.
- You can get a much bigger sum of money
- Homeowners loans are more affordable – Pay less per month for more extended periods
- No guarantor is needed.
- It can help you improve your overall credit score
- Most lenders will allow early repayment with no additional cost.
Ready to use our free homeowners loan tool to find the best deal for you?
Homeowners Tip from Pat Harding
“When considering a secured loan, take the minimum you need and not the maximum you can get. it would save you money and help you build a better credit rating.”
Pat is a former UK high street bank employee of 25 years who writes amazing and helpful articles for familymoney.co.uk. Read her Buy Now Pay Later with Clarna to save and minimise loan dependency.
Homeowners’ Loan for Debt Consolidation
Homeowners’ loans are typically cheaper than unsecured short term alternatives. Often people would take a new secured loan to pay off their existing unsecured credit (loans, payday loans, store cards, car finance etc.). Our FamilyMoney experts put together a comprehensive guide to help you understand everything you need about debt consolidation loans.
Homeowners Tip from Megan Walsh
“Avoid the short term high-cost vicious circle with a secured loan. Unsecured loans are expensive and very stressful. Never take a short term loan to cover an existing payday loan. Secured loans can put you back on track.”
Megan, a former employee of over 20 years in the insurance industry, is devoted to sharing her valuable insights on familymoney.co.uk. Read her practical guide to money saving to avoid expensive credit.
Homeowners’ Loan for Home Improvements
Home improvement loans could be anything from new carpets/painting to home extensions. Taking good care of your home can increase the value of the asset. It would allow you more financial flexibility in the future. Here at Familymoney, we always encourage people to invest in their homes, live well and take action to increase the value of their assets.
Homeowners Tip from Thomas Henderson
“Home extensions and improvements can increase the value of your house. The increased value will allow you to borrow more money in the future or refinance your house to save a lot of money.”
Thomas worked as a consultant in personal finance in the UK for 18 years. He has found a passion in sharing his experience on familymoney.co.uk. Read his complete mortgage guide here
FamilyMoney Homeowner Loans References
To help our readers apply for the best homeowners loan, we analysed hundreds of offers, lenders and resources available in the UK. We put together case studies examples and try to explain the typical conditions of these loans in simple, straightforward language. below are some of the references we used to create this paper:
1. MoneySavingExpert A comprehensive source of financial information, including homeowners loans, created by financial journalist Martin Lewis. Known for its consumer-focused advice and comprehensive guides.
2. Which? A UK-based consumer advice service that provides independent advice and reviews on a broad range of products and services, including financial products like homeowners loans.
3. The Financial Conduct Authority (FCA) The FCA is a financial regulatory body in the UK that provides consumers with advice and information about financial products and services.
4. MoneySuperMarket An online comparison website that compares various financial products, including homeowners loans, based on individual needs.
5. The Money Advice Service Free and impartial money advice set up by the UK government. Covers a wide range of financial topics, including homeowners loans.
