If you’re a homeowner, you may find yourself in a position where you need extra funds for home improvements, unexpected expenses, or any other purpose. Fortunately, there are several loan options available for homeowners.
In this guide, we’ll walk you through the different types of loans, how to boost your chances of qualifying for them, and tips for securing the best loan.
Types of loans available for homeowners
There are several loan options available that may help you raise the funds you need. Some of the most common options include:
Unsecured loans:
Unsecured loans, or personal loans, are a borrowing option that doesn’t require security. Lenders base approval on your credit history and income. They’re ideal if you need funds for smaller expenses, like a car purchase or home improvements, without risking your property.
Remortgaging:
Remortgaging is when you switch your current mortgage to a new deal, either with the same lender or a different one. You may choose to remortgage to get a better interest rate, adjust loan terms, or borrow more than you owe to access extra funds.
Further advance:
A further advance is where you borrow extra funds from your current mortgage provider, using your home as security. It can be a more cost-effective option, as interest rates are typically lower than personal loans. Plus, you already have a relationship with the lender, so it can be easier to achieve in some cases.
Secured loans:
Secured loans require security, like your home, to back the loan. This may allow you to access larger loan amounts at lower interest rates compared to unsecured loans. However, if you fail to repay, you risk losing the property used as security, so it’s important to borrow responsibly. These loans are also known as second charge mortgages or homeowner loans.
How to get a loan as a homeowner
Determine the type of loan you need:
The first step is understanding what type of loan suits your needs. Once you’ve chosen, you can start planning the next steps. If you’re borrowing more from your current mortgage provider, the process is simple, you just need to reach out to them and follow their instructions.
Shop around for the best terms:
Interest rates and loan terms can vary between lenders. It’s essential to compare offers from multiple providers. Make sure to check the interest rate, fees and terms before making a decision.
Prepare the necessary documents:
Lenders will require several documents to process your loan application, which may include:
- Proof of income
- Proof of homeownership
- Identification
Submit your application:
Once you’ve selected a lender, submit your loan application. The lender will review your financial situation, documents and credit score to decide whether to approve the loan. If approved, the lender will make an offer that includes the loan amount, interest rate, and repayment terms.
Review and accept the loan offer:
Carefully review the loan offer, and make sure it aligns with your financial goals. If everything looks good, accept the offer, and the loan will be processed.
Tips for getting the best loans for homeowners
- Know your credit score: Your credit score can play a big role in determining the loan options and interest rates available to you. Make sure you check your credit report and work on improving your score before applying if needed.
- Shop around: Don't settle for the first offer you get. Compare different lenders, interest rates, and terms to find the best deal for your needs.
- Consider your repayment ability: Make sure the loan payments fit comfortably within your budget.
- Look at the fees: Some loans may have other fees, like arrangement fees or early repayment charges. Make sure you ask about all the associated costs before committing.
Summary
Getting a loan as a homeowner may help you cover the costs of a range of plans. There are different loan options available, such as unsecured loans, remortgaging, further advances, and secured loans. Each option has its own pros and cons, so it’s important to think carefully about which one suits your needs. By doing your research and being well-prepared, you can choose the right loan and borrow responsibly.
Loans are secured against property - Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. Be aware that consolidating debt could extend your repayment term and increase the total amount you pay over time.
