Does my income matter if I take out a homeowner loan?

Does my income matter if I take out a homeowner loan?

author: Linzi Nuttall

By Linzi Nuttall


Quite simply, yes your income matters. A lot.

Although that’s the top and tail of it and answers the main question, in this blog we’ll explain why your income matters when you take out a homeowner loan and what happens if it goes away.

Okay, so it matters. But why?

Unless you have savings to the value (or more) of the loan you want – which would beg the question why are you applying for a loan in the first place – you’ll struggle to get a loan without an income.

The very fact your income is taken into account when you apply for a homeowner loan – also known as a secured loan - should indicate to you that it is important.

That’s because you’ll be making regular monthly repayments to your loan, so you’ll need a regular income to keep up with those repayments. This is normally a wage or other form of income.

If this income was to suddenly stop coming in and you didn’t have savings to rely on to repay the loan, you would be at risk of losing your home. This is why a steady income is so important.

For sale

A secured loan is a way of lenders guaranteeing that should something go wrong with you repaying the loan, they will get their money back through the sale of your property.

On that token, unless you’re willing to flog your home to repay your loan should the worst come to the worst – or risk it being repossessed - you need to be sure you can afford your repayments when you apply for a secured loan.

Selling your house to repay your loan is far from a best-case scenario. You’d clear the debt but lose the roof over your head.

This is something you need to consider when applying for a loan like this. What would you do if your income was to drop, or suddenly stop?

If I could lose my home, why would I take out a homeowner loan?

One of the upshots of being a homeowner is that if you want to take out a loan, you have more choice of products.

You can choose to either take out a loan that is guaranteed against your property (secured) or not (unsecured). Whereas if you don’t own a property, you can only apply for an unsecured loan.

Given the choice, many homeowners choose to apply for secured loans because they often come with better interest rates, which can make the monthly repayments more affordable. Having said that, they are designed to provide larger sums of money than unsecured loans and are paid back over a longer period, so you might pay more interest overall.

Going smoothly

Say things go to plan. You have a steady income that continues throughout the life of the loan and you repay it on time and in full. You have enjoyed the benefits of a cheaper rate and used a loan exactly as planned.

It only becomes a problem if your income stops and you can’t afford to meet your monthly loan repayments. If you have a steady income coming in now and it seems unlikely it’ll change, it is still something you need to consider when applying for a secured loan.

Secured loans can and do work for many homeowners – you’d just need to spend a bit of time weighing up the pros and cons of whether you’re willing to secure a loan against your property before you apply. 

Disclaimer: All information and links are correct at the time of publishing.

author: Linzi Nuttall

By Linzi Nuttall

Does my income matter if I take out a homeowner loan? Does my income matter if I take out a homeowner loan?