How to get a homeowner loan

To get a homeowner loan you’ll need to match the lender’s criteria, which can vary from one company to another. Most lenders will consider your income, affordability, credit history, property value, and equity in your property (i.e. how much you own outright).

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What is a homeowner loan? 

A homeowner loan is a type of secured loan that’s tied to your home. As a result, this reduces the risk to the lender, meaning you can usually borrow much larger sums (and with lower interest rates) than you can with personal loans.

Homeowner loans can go up to £100,000 or more, depending on your individual circumstances and the lender. Personal (unsecured) loans, on the other hand, can go up to a maximum of around £25,000.

Be aware though, that if you’re unable to repay your secured loan, your home could be used as collateral to cover the amount you owe (though this is only ever as a last resort).

You may be eligible for a homeowner loan even if you have a less-than-perfect credit score.

This is because the lending criteria for homeowner loans is often more flexible than it is for unsecured loans - due to the fact that the lender has the security of the loan being tied to your house. As such, lenders may be more willing to lend to those with lower scores.

Common reasons for taking out a homeowner loan include:

  • home renovations
  • debt consolidation

Who can get a homeowner loan? 

Theoretically, anyone who owns a property and has equity in that property can apply for a homeowner loan, even with bad credit. Whether or not your application gets approved, though, will depend on your personal circumstances and whether you meet the lending criteria. We’ll go into this in more detail below. 

But suffice to say that you should always make sure that you meet the lenders’ criteria before applying for a loan. We suggest that you use an eligibility checker to find out if you’re likely to get accepted, before you apply.

Is it easy to get a homeowner loan? 

Homeowner loans are sometimes considered easier to get than unsecured loans. This is because your home acts as a safety net for lenders. So, they know that in the event you cannot repay your loan, they can collect what they’re owed through the sale of your house.

As we mentioned above, this action is only taken as a last resort, but it still serves as a way for the lender to mitigate their risk. As a result, they’re often more willing to lend to those who may have trouble borrowing elsewhere (e.g., due to having a bad credit history).

That isn’t to say that homeowner loan lenders don’t look at your credit history - just that they weigh it less heavily because they have that additional security.

What other criteria do lenders look at? 

It’s important to remember when applying for any type of loan, that different lenders all have different criteria. So, checking to make sure you fit your chosen lender’s specific criteria beforehand is a good idea. As such, we can’t tell you exactly what factors each lender will look at, but all lenders share some things in common. For example, they tend to look at your: 

  • income – lenders will want to ensure that your income is enough to cover your repayments. They’ll want to see proof of your earnings, such as payslips, bank statements or P60s

  • affordability – once they have proof of your income, lenders will look at your outgoings in detail and assess whether they believe you can afford to take out a homeowner loan

  • credit history – while you don’t have to have a perfect credit score to get a homeowner loan, lenders will still look at your credit report to assess your credit history 
  • property value – to work out how much you can borrow, lenders will want proof of the value of your property

  • equity – this is essentially how much of the property you own. To work out how much equity you have, you need to subtract your outstanding mortgage from the current value of your property. The more equity you have, the less of a risk you’ll appear to lenders

What documents are required for a homeowner loan? 

Exactly what documents you’ll need to accompany your homeowner loan application will depend on the lender and your individual circumstances, but you can generally expect them to ask you to provide: 

  • bank statements (to demonstrate your income and expenditure)
  • proof of income (either in the form of payslips or a P60)
  • proof of address and ownership (such as a utility or mortgage bill)
  • proof of identity (usually a driving licence or passport)

What to consider when getting a homeowner loan 

Before you apply for a homeowner loan, think about the following factors carefully:

1. Affordability 

The lender may look at your affordability, but you should look at it in detail too. Make a comprehensive list of all your income and outgoings (including the smallest things like streaming subscriptions) and see how much you have left over each month.

If you’re looking a bit light after covering your outgoings, then the chances are you can’t really afford to take out a loan.

2. Credit score 

While your credit score may not be the be-all and end-all for your homeowner loan application, it’s can impact the outcome of your application.

Remember that, regardless of the outcome, applying for a loan temporarily reduces your score. But if you always pay your loan on time, it will gradually increase. Missing payments will have the opposite effect.

3. Eligibility 

Are you eligible? Use an online eligibility checker to ensure that the loan you want to apply for is attainable.

4. Loan term and length 

Consider how much you want to borrow and how long you want to pay it back. Although you can borrow large sums of money and spread the repayments with a secured loan, longer loan terms can lead to you paying more interest in total - even with competitive interest rates.

5. Interest and charges 

When costing up your loan, remember to consider the annual percentage rate of charge (APRC). The APRC shows you the full cost of the secured loan, including interest and charges, over the full term.

It’s also a good idea to check to see if there are any early repayment charges for paying off your loan early, in case your financial circumstances change for the better in the future.

Homeowner loans from £10,000 to £100,000

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Homeowner loans are secured against your home.