How much does a homeowner loan cost?
Homeowner loans are very much like other types of loans. The cost of a homeowner loan will depend on the specific interest rate that is linked to that loan. These can vary from product to product and from lender to lender, so it’s important that you shop around when thinking about applying for a homeowner loan. As well as the interest charged on a homeowner loan, there may also be additional fees and charges to pay but this will also depend on the product and the lender. Reviewing homeowner loans across the market is advisable before you begin to apply for a loan. You may also wish to speak with an independent adviser.
What are the other costs of a homeowner loan?
You will have to pay interest on your loan, as well as charges or fees that will be set by your lender. Some lenders may opt not to charge fees, while others can apply hefty charges. Make sure that you know where your lender stands before you apply.
Interest on your homeowner loan will be charged for the entire repayment term of your loan. Interest charges will be added to your repayment rates as a matter of course – as you are repaying the initial sum borrowed, you will also be paying the interest that has been levied. The overall cost of your loan can depend on the amount of interest you are paying. If finding a cheap loan is most important to you, then you need to assess all the loans with the lowest interest rates attached to them.
It’s also really important that you are aware of the type of interest that your loan comes with, as this can impact the amount of money that you end up paying back. Some loans have a fixed rate interest while others have variable rates. Let’s take a look at the difference:
- A variable interest rates can be cheaper when you first take the loan out, but it’s important to note that these rates can change over time. Linked to the Bank of England base rate or the LIBOR rate, this means that interest can go either up or down. While the Bank of England base rate has been very low for the last few years, this could change – and dramatically – meaning that the cost of your borrowing could increase beyond what you can afford.
- A fixed interest rate will stay the same throughout the timespan of your loan. It is not linked to the Bank of England base rate, or LIBOR, and so will remain stable. This means, in real terms, that the rate that you pay back may be higher when you first start to pay off your loan, it will reduce over time as you pay more and more of the loan amount off.
When it comes to homeowner loans, it is more usual for lenders to offer variable rates instead of fixed rate options.
When you are considering applying for a homeowner loan, it is really important to look closely at what lenders offer so that you can understand what fees you may be charged as part of your loan agreement. While not all lenders attach fees to their homeowner loans, many do. It’s really important that you understand what they fees are, what they mean for your loan and how much they will impact the amount that you need to pay in the long run. Lenders may have a mixture of different fees and charges that they apply to a homeowner loan. Here are a few that you may be asked to pay for:
- Valuation fees – Applied when a valuation is undertaken to work out the value of the property that you are using as collateral
- Legal fees – Any associated legal fees with the loan
- Disbursement fees – This may include fees, such as land registry fees
- Broker fees – Fees that are payable to any broker used to assist the borrower
How can I find the best homeowner loan?
In order to find a secured loan – including a homeowner loan – it is likely that you will have to use a broker as many loans are only available through this channel. It is really important that you give this part of the process some careful thought as it can really make a difference to your outcome. It is both useful and crucial that you work your way through the points set out below when considering your application for a homeowner loan.
How much do you actually need to borrow?
What sort of a sum are you looking for? It might be that a homeowner loan is not the best financial product for your needs. If you want to borrow a sum that’s less than £25,000, you might want to think about taking out an unsecured loan, instead of a homeowner loan.
Do you know your loan to value?
It’s really important that you know where you stand. To find out this value, you will need two up-to-date- pieces of information. You will need both an accurate and recent valuation of your property alongside your outstanding mortgage balance, if you are still paying your mortgage off.
How long do you want to pay this loan off for?
Rather than choose a set time in the future and aim to have your homeowner loan repaid by that time, it might be better to work out your monthly payments and set your term loan accordingly. Making sure that your monthly repayments are affordable and reasonable will greatly increase your chances of paying off your homeowner loan without any payment issues. When you know what you can reasonably afford to pay each month, then you can decide on the best loan term for you.
Take the time to check your credit record
It can really make a difference to check your credit record before you apply for a homeowner loan. Credit reports can have mistakes on them, whether from human error or any other reason, but yours could return a red flag unexpectedly. You will only benefit from understanding if your credit rating is good, fair or bad. There are also several different actions you can take to improve your credit record, such as adding your name to the electoral register.
Make an appointment with a secured or homeowner loan broker
Experts in the secured and homeowner loan markets, they will be able to help you understand what you need to do and consider before applying for a loan. They will help you to look at all the loans on the market and to understand if a homeowner loan is the best financial product for your situation.