Smart Ways Homeowners Are Unlocking Equity Without Selling Up

If you’ve been steadily building equity in your property over several years, then you’ll have a powerful financial resource to draw upon whenever you need a quick injection of cash. Whether you’re looking to fund a new renovation, to make an investment, or to simply enjoy your leisure time, a homeowner loan can be a powerful thing.

Because of rising house prices, it’s also very affordable. It might be that you have greater leverage to access funds, simply because of a change in your home’s value since the time you bought it.

The rise of the savvy borrower

There are a number of good reasons to consider a loan against your property, rather than a remortgage.

To begin with, a loan will leave your mortgage intact and undisturbed. This means that you’ll retain the rate and term of the existing mortgage. What’s more, remortgaging could result in you being locked into a new, higher interest rate. Homeowner loans tend also to be more flexible, and accessible to those with lower credit ratings.

Popular reasons people are borrowing against their home

In practice, homeowners tend to take loans out against their property in order to fulfil a specific purpose. This might be a kitchen renovation, or a year of private school for your children.

It might also be a means of paying off other debts. If you’re paying high interest on credit cards, then swapping them for a relatively affordable secured loan can save you a considerable amount in the long run.

A loan of this kind might also give you the capital you need to get a new business venture off the ground. Before going down this route, however, you’ll want to make sure that your business plan is sound, and that you aren’t at risk of losing your home in the event that your business doesn’t succeed.

What to know before applying for a homeowner loan

The interest rate attached to this form of loan tends to sit in the middle ground. They’re more affordable than unsecured loans, but not quite as affordable as mortgages. When you add on additional fees and charges paid to brokers, this can add up.

You can expect the lender to conduct an affordability check before the loan is approved. You should assess your finances independently, and devise a strategy for dealing with a rise in interest rates.