If you own your own home there are multiple options available to you for financial aid. Here are some common examples, explained.
If you own your own home, you have access to a greater cash pot than those that do not. This cash pot comes in the form of credit and covers many different types of loan and borrowing product. Below, we have explained a few of the most common of these, in the hopes that it can help you understand your options. When the time comes to borrow big, you can recall this article and use it to help you decide on the product that is right for you. Are we sitting comfortably? Good. Let’s start with the Homeowner Loan.
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What is a Homeowner Loan?
A Homeowner Loan is a financial product that uses your home as an asset to back the lending. If you fall through on a homeowner loan, you risk your home itself. However, the benefits are that this product is far cheaper than a standard loan is, since you have the asset to back yourself up. This loan is a great idea for those that want to make a lump sum purchase, such as a new car. If you want to go back and forth with a contractor over pricing, or if you want to make more than one purchase, consider a HELOC, instead.
When you take out a homeowner loan, you can choose how much to borrow and often how long it takes to pay it back. If you fall through on payments, your home may be eligible for repossession.
What is a HELOC?
A Home Equity Line of Credit allows you to borrow up to 80% of the value of your home. This value goes down if you still owe money on the mortgage. If you have a £100,000 home and you take out a HELOC, you can borrow up to £80,000. If you still owe £20,000 on your mortgage, the lendable sum drops a further £20k, so the total borrowing amount would be up to £60,000. HELOCs have much the same risk as a homeowner’s loan, but if you make multiple purchases, such as home improvements and refurbishments, you don’t need to apply for a new loan. You borrow once and pay on what you owe.
Find out more about using a HELOC loan for Home Improvements with the Selina Advance team. While the HELOC was previously restricted to the USA and Australia, this innovative company are bringing the same financial tool to the UK. This should help thousands of customers to create the living spaces they’ve always wanted, without Remortgaging the house to have to do it.
Why Not Get an Unsecured Personal Loan?
As a homeowner, you are still eligible to take out a standard loan. There’s nothing wrong with this option and all the usual terms and conditions still apply. When you take out a loan not backed by an asset like your home, you lower the risk of repossession. Unfortunately, that increases the cost of the loan repayments.
Financial Freedom is in your Hands
Use this simple guide to keep to the right lending path and you should be financially free to make your own decisions.