If you are a homeowner your best option to borrow at a low interest rate may be to consider a home equity loan. A home equity loan is similar to a secured loan, in that they are borrowing options that require collateral to be provided in order to guarantee the loan. While a secured loan can be secured against any valuable asset, a home equity loan is directly dependent on the value of your home that is not already tied up in your mortgage. If your home is worth £200 000, and your mortgage is £120 000, the equity available to use as security on a loan is £80 000. In other words, a home equity loan is a way of releasing some of the value of your home as cash.
Both secured loans and home equity loans are an alternative to remortgaging your home in order to borrow. Home equity loans and secured loans are second loans against your home. This makes home equity loans and secured loans a higher risk to the lenders, as in the event of your reneging on the loans, the mortgage is the first loan that will be settled by foreclosure, while second loans such as home equity loans and secured loans will be settled after the primary lender has recovered their finance. As a result, interest rates will be generally higher on a home equity loan and a secured loan than on a mortgage in order to alleviate some of this higher risk.
The main advantage of a home equity loan or a secured loan over a remortgage is that they are generally much cheaper and easier to set up. A remortgage will more than likely require new property valuations, surveys, cost you solicitors’ fees and most probably an early redemption charge from your current lender; while home equity loans and secured loans are relatively much cheaper to arrange.
To compare your options regarding home equity loans and secured loans complete the form on this page. Totally Money will source the market’s most competitive home equity loan deals and secured loans, and put you in touch with an independent financial expert for advice on finding the home equity loan or secured loan that best suits your requirements and budget.