Home Owner Secured Loans
Why do home owners get such low rates?
When you compare loans, you'll often find that the lowest interest rates are for home owner secured loans; if you're a tenant or live with your family then you'll have to pay higher interest rates. That's because home owners can use their property as security, which reduces lenders' risk.
Some of the best interest rates – and the majority of newspaper adverts from lenders – are for home owner secured loans, where the borrower uses their home as security to reassure the lender. Tenants and people who live with their family can't provide that security, which means they're a higher lending risk; that means they'll usually pay higher interest rates on any loan.
To qualify for home owner secured loans you don't just need to own property: you need to have equity, too. Equity is the difference between the value of your home today and the amount of money outstanding on your mortgage; for most home owners if you've been paying the mortgage for a few years the balance has reduced while the value of your home has increased. If you've had a mortgage for a long time the amount of equity in your home can be massive, and with home owner secured loans you can borrow a percentage of that equity – usually between 80% and 95% - provided it doesn't exceed the lender's maximum loan amount. In most cases that figure is £25,000, but many lenders will let you borrow more.
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