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When Can I Get a Home Equity Loan?

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Scott
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Scott Nelson

Managing Director

MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.

Learn more about Scott
&
Janine
Janine Marsh Profile Picture

Janine Marsh

Financial Expert

Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.

Learn more about Janine
· Feb 7th, 2024
Looking for a loan? £5,000 to £2.5 million available, compare deals below.

How much do you want to borrow?

Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable.

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Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable

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when get home equity loan

Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable

Are you wondering about home equity loans? Maybe you’re asking, “How soon can I pull equity out of my home?” It’s a big decision, and there’s a lot to learn. We’re here to help.

In this article, we’ll explain:

  •  What a home equity loan is and how it works
  •  The real cost of a bad home equity loan
  •  The good and bad sides of a home equity loan
  •  When is the best time to apply for a home equity loan
  •  How hard it is to get a home equity loan

We understand that it can seem tricky. But don’t worry! Each month, over 6,900 people visit our website for advice on loans that are secured on their homes. We’re here to make it simple for you.

Let’s get started!

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How much do you want to borrow?

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Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable

What is a home equity loan?

A home equity loan is a secured loan that uses home equity as the security in the loan agreement. The homeowner’s borrowing power is determined by their available home equity and the lender’s conditions, including what Loan to Value (LTV) ratio is offered. 

A standard home equity loan – not a HELOC – provides the homeowner with a lump sum cash loan which can be spent how they please. This loan is repaid with interest – usually a fixed rate of interest – through monthly repayments over a set repayment term. If no payments were missed by the end of the repayment term, the loan will have been repaid. 

When can I get a home equity loan?

You can get a home equity loan when:

  1. You own a property
  2. You have enough equity built up in the property to satisfy the lender’s criteria regarding its LTV and minimum loan amount
  3. Your personal finances and credit score suffice the lender’s criteria

Change the amount you are looking to borrow to see what offer you could get

£

Lender

APRC

Monthly payment

Total amount repayable

United Trust Bank Ltd

5.99%

£218.73

£26,247.92

Pepper Money

6.86%

£220.24

£26,429.17

Together

6.95%

£220.40

£26,447.92

Selina

7.5%

£221.35

£26,562.50

Equifinance

7.7%

£221.70

£26,604.17

Spring

10.5%

£226.56

£27,187.50

Loan Logics

11.2%

£227.78

£27,333.33

Evolution

11.28%

£227.92

£27,350.00

Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable.

Search powered by our partners at LoansWarehouse.

How soon can you apply for a home equity loan?

There is no time limit on how soon you can take out a home equity loan on a property, although you will need enough home equity to qualify for these types of loans. Unless you bought the property with more than a 20% house deposit, you may have to wait so many months or years before enough home equity has accumulated to get a home equity loan.

For example, you might buy your first home for £160,000 by using a 20% deposit (£32,000) and taking out a £128,000 mortgage. From the outset, you have 20% equity in your home, but you might not be allowed to use this equity as security to secure a home equity loan straight away.

Lenders often apply minimum loan amounts to home equity loans and might only offer a Loan to Value ratio of 80% at most. If the lender will only allow you to secure up to 60% of your equity as a loan, the homeowner in the example above would only be allowed to take out a home equity loan up to a value of £19,200 at most. 

But the same lender might ask that all home equity loans require a minimum loan amount of £25,000, so it wouldn’t be possible to take out a smaller loan. And therefore it wouldn’t be possible for the homeowner to take out a home equity loan just yet. They will need to keep making mortgage payments to build up their home equity before a home equity loan is possible for them.

On the other hand, someone might buy their first home for £160,000 using an £80,000 deposit and an £80,000 mortgage. This person could potentially take out a home equity loan with the lender in the example above because they already have £80,000 home equity from day one. 

» TAKE ACTION NOW: Compare deals from the UK’s leading lenders

How hard is it to get an equity loan?

Getting a home equity loan can be easier than securing unsecured loans because the lender knows it has a better chance of recovering the money owed due to the security in the credit agreement. But this doesn’t guarantee you’ll be accepted for the loan. 

Getting approval for a home equity loan will require you to meet the lender’s criteria. Your finances will be asses to make sure the loan is affordable, and your credit score will be checked to ensure you are likely to repay. 

Get your home equity loan deals

Looking for a loan? £5,000 to £2.5 million available, compare deals below.

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The authors
Scott Nelson Profile Picture
Author
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh Profile Picture
Financial Expert
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.