The term ‘home equity loan’ refers to a range of products. It most commonly refers to releasing the equity tied up in your home permanently as cash. This form of home equity loan is popular with people who have repaid their mortgage in full, but wish to release some of its value in cash. Often these people are asset rich, and relatively cash poor, and are looking for an affordable alternative to a pension. These loans are either repaid upon the sale of the property, and no capital or interest repayments are required in the meantime.
Home equity loans can also refer to the process of remortgaging to release the equity built up in your home. This means simply remortgaging for a larger amount either with your current lender or a new lender; your mortgage term will be extended to repay the extra amount without needing to increase your monthly repayments. You may wish to take out this form of a home equity loan for home improvements, debt consolidation, or for a special holiday or purchase. This is a very affordable way to borrow money as opposed to unsecured loans.
Home equity loans are also often another term for a secured loan, as you are effectively borrowing money and using the equity in your home as security in order to borrow as affordably as possible. When opting for a home equity loan as opposed to a remortgage, you will make monthly repayments as with any regular secured or unsecured loan.
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