Best Homeowner Loan Providers & Sites in 2021
As is the case with all loan types currently active in the UK market, homeowner loans come with their pros and cons. On the one hand, you are not only likely to improve your chances of being approved for a loan by putting your home up as collateral, but you’ll also benefit from a much more favourable rate of interest. However, you need to make some serious considerations about whether or not you can afford to pay the loan back, not least because you could lose your home if you end up defaulting.
With that being said, we have created the ultimate guide to the Best Homeowner Loans in the UK. Before we unravel the best three providers, we will give you a full breakdown of what a homeowner loan actually is, how they work, and what you need to look out for. By the end of reading our guide from start to finish, you’ll be able to make an informed decision as to whether or not a homeowner loan is right for your individual needs.
- Simple and straightforward loan application process
- Performs soft credit score search that won't affect your score
- know if you are eligible beforehand
Pros and cons of homeowner loans
- Borrow a certain percentage of the equity in your home
- Improve your chances of approval by putting your home up as security
- Benefit from more competitive APR rates
- Loans can be obtained in less than two weeks
- LTV ratios of up to 95%
- Failure to repay your loan could result in your home being repossessed
Homeowner loan providers: Reviewer’s choiceReviewers ChoiceOcean FinanceAvailable Loan Amount£10,000 - £100,000Available Term Length5 YearsRepresentative APR2.6% - 26.4% APRCArrow LoansAvailable Loan Amount£2,500 - £25,000Available Term Length15 yearsRepresentative APR19.9% APR
How does a homeowner loan work? Read our step-by-step guide
While many of the specifics found in a traditional loan remain constant with that of a homeowner loan, the amount that you can borrow is usually dictated by the value of your property. This is similar to how an auto loan will take the value of your car or motorbike into account when deciding how much you can borrow.
Nevertheless, as homeowner loans can be a somewhat complex battleground for newbies, we have outlined the general step-by-step process below.
Step 1: Find a trusted homeowner loan provider
Firstly, you will need to find a homeowner provider that meets your individual needs. Ideally, you are looking for a lender that will offer enough money to cover your requirements, and at the best possible APR rates. Moreover, you also need to explore what Loan-to-Value (LTV) ratio the provider is willing to offer. Don’t worry, we’ll cover the ins and outs of the LTV shortly.
Ultimately, the easiest way to find the best homeowner loan providers is to scroll down to the bottom of this page – whereby we list the best 3 issuers currently in the UK market.
Step 2: Enter details about your home
Once you have found your chosen homeowner loan provider, you will then need to enter information pertaining to your property. This will include the full address of the home, and the specific name of the owner – which needs to be yourself.
The homeowner loan platform will then use the information you entered against the third-party sources it uses to determine how much your home is currently worth. While the figure will not be an exact science, it will be there or thereabouts. Once the system has done its checks – which should take no more than a couple of minutes, you will then be advised how much the provider believes the property is worth.
Step 3: Enter your personal and financial information
In the next stage of your application, you will need to provide the loan provider with some personal information. This is no different to any other credit-based product, and will typically include your full name, home address, previous addresses, date of birth, residency status, email address, and home telephone number. Next, you will then need to enter some information about your income.
This will include your employment status, monthly income, name and address of your employer, and how frequently you get paid. You also need to enter some information about your current debts. If you hold any outstanding balances – regardless of the type of credit product, then you will likely need to enter this within your application.
Step 4: Assess your LTV
In the case of homeowner loans, the amount that you can borrow is usually determined by the LTV. For those unaware, this is the percentage of your home’s value that you can borrow. The specific amount will not only vary from lender-to-lender, but it will also be based on your individual financial profile. This is why you are required to enter information about your identity, income, and debt – so that lenders can assess your creditworthiness.
Here’s a quick example of how the LTV works with respect to homeowner loans.
- The loan provider believes that your home is worth £200,000
- The loan provider believes that you have an excellent credit rating
- As such, the loan provider will offer you an LTV of 80%
- This means that you can borrow up to 80% of your home’s value – which at £200,000, amounts to £160,000.
In layman terms, the higher your LTV, the more that you can borrow.
Step 5: Choose your loan term and assess the APR
Once you have received your LTV percentage, you will then get to enter how much you want to borrow. To clarify, you cannot borrow more than what the LTV specifies. Nevertheless, once the amount has been ascertained, you then need to determine how long you want to borrow the funds for. It is important to note that at this stage of the application, you will have already had your creditworthiness evaluated by the lender, meaning that you can view how much interest that you need to pay on the homeowner loan.
However, the amount is likely to vary depending on how long you want to borrow the money for. For example, the longer that you decide you need to pay back the loan, the higher the APR is likely to be. As such, spend some time thinking about how quickly you can pay the loan back without it impacting your day-to-day expenses.
Step 6: Sign the digital loan agreement
Once you are happy with the loan amount, APR rate, and the length of the term – you will then need to sign a digital loan agreement. Before you do this, you will need to enter your bank account details. This is not only the bank account that you wish to have the loan funds paid into but also the bank account that you will be making your repayments from.
Don’t forget, you will need to set-up a direct debit agreement, which will ensure that you always make your repayments on time. This will be for a fixed amount each month, with the funds typically taken on the same date.
Nevertheless, to complete the homeowner loan application, you will then need to sign a digital loan agreement. Once you do, the lender will then complete their final checks before forwarding the loan funds on to you. Unlike a conventional loan provider – which can usually forward the funds on to you within a couple of days, homeowner loans can take up to 2 weeks. This is because of the sheer size of the loan, and the fact that you are putting your property up as collateral.
Best 3 homeowner loan providers
If you have read our homeowner loan guide up to this point, then we hope that you know have a full grasp of what a homeowner is, how they work, and what you need to look out for. If you think that a homeowner loan suits your personal financing needs, then we are now going to discuss three of the best providers that are worth considering.
Before we list our recommended providers, here’s a breakdown of what we typically look for in a homeowner loan lender.
Criteria used to rank the best homeowner loan providers
- Lenders with the most competitive interest rates
- How much the lender is able to offer
- What LTV ratio the lender offers
- What loan terms are available
- What the default process is
1. Ocean Finance – Borrow between £10,000 - £100,000
On top of mortgages, personal loans and credit cards, Ocean Finance is a third-party homeowner loan platform that aims to match you with lenders. In this sense, the provider is not a direct lender. On the contrary, they simply assess your financial circumstances before passing your data on to the lenders within its network.
Nevertheless, the platform facilitates homeowner loans of between £10,000 and £100,000, which is huge. Furthermore, the platform allows you to search for homeowner loan offers on a soft-credit basis, meaning that the application will not have a detrimental impact on your credit score. In terms of the fundamentals, Ocean Finance explains that the homeowner loan lenders within its network will charge anywhere from just 2.6% APRC (Annual Percentage Rate of Charge), all the way up to 26.4% APRC.
- Extended loan terms of between 18 and 60 months
- Soft-credit enquiry - applying won't hurt your credit score
- Access homeowner loans of between £10,000 and £100,000
- Ocean Finance is not a direct lender
- Not guaranteed you will qualify for the maximum loan limit
2. Arrow Loans – Loan size judged on a case-by-case basis
If you're instead looking for a direct lender, then it might be worth enquiring with Arrow Loans. The UK homeowner provider was first established way back in 1957, meaning that it has more than 60 years' worth of experience in the UK lending arena. The representative rate offered by Arrow Loans is 19.9% APR, although this is just for illustrative purposes.
In other words, you could pay more or less than this. The lender notes that 51% of its homeowner loan applicants are successful, and you can usually complete the vast bulk of the application process online. In order to be eligible for an Arrow Loans homeowner loan, you will need to be aged between 21 and 68, live in England or Wales, and of course - own the home that you are looking to take out financing against. Finally, the provider also notes that you will likely pay an origination fee of £495 if your application is approved, and the lender allows you to repay your loan early if you have the financial means.
- Arrow Loans is a direct lender and therefore doesn't charge origination fees
- Solid reputation of reliability
- Wholly online transcation processing
- Charges an origination fee of £495 if approved
- One may consider their representative rate of 19.9% APR high
3. Shawbrook Bank – Borrow between £10,000 - £500,000
Founded as recently as 2011, Shawbrook Bank is a UK-based financial institution that serves both retail and commercial customers. In a nutshell, the bank is offering a headline APRC rate of 4.1%, which is very competitive. However - and once again, there is no guarantee that you will get this rate, as the lender will look at your creditworthiness. Nevertheless, Shawbrook Bank offers a maximum LTV of 65%. This means that if your home was worth £200,000, you would be able to borrow up to £130,000.
The minimum and maximum loan amount that the lender is happy to facilitate equates to £10,000 and £500,000 respectively. In terms of the length of the homeowner loan, this starts at just 3 years, up to a maximum of 25 years.
- Extended loan limits of between £10,000 and £500,000
- Attrcative loan term of between 3 years and 25 years
- Shawbrook is a direct lender
- One may consider their headline rate of 4.1% APR expensive
- Low maximum LTV of 65%
What is a homeowner loan?
In its most basic form, a homeowner loan is a type of secured loan whereby you put your home up as collateral. Otherwise referred to as a ‘home equity loan’, a homeowner loan will base your loan package on the specifics surrounding the value of your property. On top of the property’s value, homeowner loan lenders will also look at your individual credit profile when assessing how much to lend you and at what rate.
However, by putting your home up as security, you will not only improve your chances of being accepted for the loan, but it is also likely to come with a better rate of interest than what you would have obtained with a traditional personal loan.
As is the case with all loan types, you will be required to pay interest on your homeowner loan for as long as the loan is outstanding, and you will likely incur fees if you are late with your repayments. However, the key difference with a homeowner loan in comparison to unsecured loans is that you could lose your property if you end up defaulting.
What if I still have a mortgage?
If you are still paying your home off in the form of a mortgage, you are still likely to be considered for a homeowner loan. However, the key difference is that the lender will need to assess how much equity you have in your home. For those unaware, the amount of equity refers to the amount of money you have paid into the home, in relation to the size of your outstanding mortgage.
As the specifics can be quite complex for first-timers, here’s a quick example to clear the mist.
- Your home is worth £300,000 as per the latest market valuation
- When you originally bought the home, it was worth £200,000, which is the same amount that you took out in the form of a mortgage
- Since then, you have paid a total of £150,000 off your mortgage
- This means that you still have £50,00 to pay
- We then need to subtract this £50,000 from the current market value of your home, which is £300,000
- This means that your equity is £250,000 (£300,000 – £250,000)
How much will a homeowner loan cost?
In terms of how much you are likely to pay, this will be determined by a range of contributing metrics. In fact, this is no different from any other loan application. Here’s a breakdown of the main metrics that lenders will look for when deciding how much to charge you.
- Size of the loan
- How long you want to borrow the funds for
- Your current credit score
- Your previous relationship with debt
- How much equity you have in your home
- How much your home is worth at present
Can I lose my home if I default?
The simple answer to this is ‘yes’. After all, you are putting your home up as collateral, so you do face the very real risk of losing it in the event that you default. However, the process of actually losing your home is an extremely long one, and it is super costly for the lender. This isn’t to say that the lender won’t proceed with the process of repossession, especially taking into account the sheer size of the amount owed.
Most importantly, if you do miss a payment, you will likely incur a late payment fee, with interest being added to the fee itself. However, if that single late payment turns into multiple missed payments, this is the point that the lender is likely to take action against your home. This is why the risks of homeowner loans are so much higher than a conventional personal loan. If you are able to obtain the latter at a reasonable rate of interest, then this is most likely the best option.
- Simple and straightforward loan application process
- Performs soft credit score search that won't affect your score
- know if you are eligible beforehand
Glossary of loaning termsCredit Score
A credit score shows your creditworthiness. It's primarily based on how much money you owe to loan or credit card companies, if you have ever missed payments or if you have ever defaulted on a loan.Guaranteed Approval
Guaranteed Approval is when, no matter how bad, your credit score its, your loan application will not get declined.Credit Limit
A Credit Limit is the highest amont of credit a lender will lend to the borrower.Collateral
Collateral is when you put up an item against your loan such as your house or car. These can be repossessed if you miss payments.Cash Advance
A Cash Advance is a short-term loan that has steep interest rates and fees.Credit Rating
Your Credit Rating is how likely you are to fulfill your loan payments and how risky you are as a borrower.Fixed Interest Rate
Fixed Interest Rate is when the interest rate of your loan will not change over the period you are paying off you loan.Interest
The Interest is a percentage based on the amount of your loan that you pay back to the lender for using their moneyDefault
If you default on your loan it means you are unable to keep up with your payments and no longer pay back your loan.Late Fee
If you miss a payment the lender will charge you for being late, this is known as a late fee.Unsecured Personal Loan
An Unsecured Personal Loan is when you have a loan based solely on your creditworthliness without using collateral.Secured Loan
A Secured Loan is when you put collateral such as your house or car up against the amount you're borrowing.Prime Rate
This is the Interest Rate used by banks for borrowers with good credit scores.Principal
The Principal amount the borrower owes the lender, not including any interest or fees.Variable Rate
A Variable Rate is when the interest rate of you loan will change with inflation. Sometimes this will lower your interest rate, but other times it will increase.Installment Loan
An Installment Loan is a loan that is paid back bi-weekly or monthly over the period in which the loan is borrowed for.Bridge Loan
A Bridge Loan is a short term loand that can last from 2 weeks up to 3 years dependant on lender.AAA Credit
Having an AAA Credit Rating is the highest rating you can have.Guarantor
A Guarantor co-signs on a loan stating the borrower is able to make the payments, but if they miss any or default the Guarantor will have to pay.LIBOR
LIBOR is the London Inter-Bank Offered Rate which is the benchmarker for the interest rates in London. It is an average of the estimates interest rates given by different banks based on what they feel would be the best interest rate for future loans.Home Equity Loans
Home Equity Loans is where you borrow the equity from your property and pay it back with interest and fees over an agreed time period with the lender.Debt Consolidation
Debt Consolidation is when you take out one loans to pay off all others. This leads to one monthly payment, usually with a lower interest rate.Student Loan
If you obtain a Student Loan to pay your way through College then you loan is held with the Department for Education U.K.Student Grants
Financial Aid in the form of grants is funding available to post-secondary education students throughout the United Kingdom and you are not required to pay grant
Am I guaranteed to get a homeowner loan?If you are currently a homeowner with all, or most, or your mortgage paid off, then there is a very good chance that you will be accepted. This is because the lender knows that your home can be repossessed in the event that you default, so the acceptance rates are significantly higher in comparison to personal loans.
What are the benefits of a homeowner loan?The overarching benefits of choosing a homeowner loan as opposed to a traditional personal loan is that you stand a much better chance of being approved. Moreover, you will often find that you are able to borrow the funds for much longer, and at a much more competitive rate of interest.
How much am I able to borrow with a bad credit lender?This is usually based on the LTV that the lender is able to offer you, which simply equates to the amount of funds available in comparison to the value of your property. For example, if your property is worth £150,000 and the lender offers you a maximum LTV of 50%, this means that you can borrow up to £75,000.
How long does it take to apply for a homeowner loan?As is to be expected when you take the sheer complexities and size of a homeowner loan into account, the process can actually take up to 2 weeks - sometimes longer. The lender will need to perform a significant amount of checks on you as the borrower, as well as on the property that you are looking to put up as collateral.
Will I need to upload any documents?Unlike a personal loan - which usually allows you to obtain the funds once your information has been electronically verified, homeowner loans come with much more red-tape. Most specifically, you will need to upload the required documents that proves you are the rightful owner of the property in question.
Latest News View all
If you’re looking for a low-cost share dealing platform that makes it super easy to buy and sell stocks, ETFs, and funds, it might be worth considering Halifax. You don’t need to have a current account with the provider, and getting started takes just minutes. In this article, we review the ins and outs of...
The United Kingdom’s high street banks approved close to a million mortgages in 2019. Data gathered by LearnBonds.com indicates that 982,286 mortgages were approved in 2019, an increase of 7.4% from 2018’s 909,597. The mortgage approval entails loans for home purchase, remortgaging and other loans. Compared to 2018, the number of mortgages approved for home...