TL;DR A homeowner loan is a second mortgage secured against the equity in your property, taken out alongside your existing mortgage. It suits homeowners who need to borrow a larger sum but cannot or do not want to remortgage.
Your home is used as security, so your existing mortgage lender must agree before a second charge can be registered. Speaking to an independent mortgage broker is the best way to compare your options before you apply.
A homeowner loan is a secured loan taken out against the equity in your property, alongside your existing mortgage.
It lets you borrow a lump sum from a new lender without touching your current mortgage deal, which is why it is also called a second charge mortgage or secured loan.
Most homeowners consider one when they need a significant sum of money and a personal loan will not cover it. By using the equity built up in your property, you can access larger amounts than most unsecured lenders would consider.
The name can be confusing because these loans go by several different titles.
You may have seen them called secured loans, second charge mortgages, or second mortgages. They are all the same thing. This guide explains how they work, who they suit, what they cost, and why they might or might not be the right option for you.
What Is a Homeowner Loan?
A homeowner loan is a loan secured against your property, taken out alongside your existing mortgage.
Your main mortgage is the first charge on your home. The homeowner loan sits behind it as a second charge, which is why these products are also called second charge mortgages.
Because the loan is secured, the lender takes a legal charge over your property at the Land Registry. This gives them the right to force a sale if you stop making repayments and all other recovery options have been exhausted.
That is the fundamental trade-off: you gain access to a larger loan at a lower rate than an unsecured product, but your home is at risk if things go wrong.
How Much Can You Borrow?
Lenders generally offer homeowner loans from £10,000 up to £500,000 or more, depending on your circumstances. The amount available to you comes down to your equity, your income, and the lender’s maximum loan to value (LTV) ratio.
According to the Equity Release Council, the total value of UK property equity reached a record £5.7 trillion in 2024, with the average mortgaged home carrying over 40% equity.
That equity is what a homeowner loan is based on.
Equity is the difference between what your property is worth and what you still owe on your mortgage.
Say your home is worth £550,000 and you have £200,000 left on your mortgage. Your equity is £350,000. Most lenders will lend up to 80% to 85% of your property’s total value across both loans combined, so the new loan cannot push you above that threshold.
How Long Can You Spread the Repayments?
Repayment terms run from 5 years up to 35 years in some cases, though your age will affect what a lender is prepared to offer.
Longer terms reduce your monthly payment but increase the total interest you pay over the life of the loan. A broker can model different term lengths so you can see the trade-offs clearly before you commit.
How Does a Homeowner Loan Work in Practice?
Once you apply, the lender assesses your income, outgoings, credit history, and the equity available in your property. The process is similar to applying for a mortgage, though generally less involved.
Getting Permission from Your Existing Lender
Before the new lender can register a second charge on your property, your existing mortgage lender must give written consent. The incoming lender writes to them directly to request this.
If your current lender refuses, the application cannot proceed on a legal charge basis. The FCA’s mortgage lending rules require the second charge lender to seek this consent before proceeding.
Some specialist lenders will accept an equitable charge instead in these circumstances, but this is the exception rather than the rule.
Valuation and Legal Work
The lender will instruct a valuer to inspect your property and confirm its current market value.
This is not a full structural survey, but it does affect how much you can borrow. Once the valuation is complete and the application is approved, solicitors handle the registration of the second charge at the Land Registry. The whole process takes around two to four weeks from application to funds being released.
Learn more: Property Survey Guide
Making Repayments
After completion, you have two separate monthly payments. Your original mortgage payment continues as normal with your current lender. The homeowner loan payment goes to the second charge lender. These payments are completely independent of each other and do not combine.
Who Can Get a Homeowner Loan?
Homeowner loans work best in situations where remortgaging either is not possible or would cost more than it saves.
People Locked into a Fixed Rate Mortgage
If you are mid-way through a fixed rate deal, remortgaging early could trigger an early repayment charge (ERC). These penalties can run into thousands of pounds.
Taking out a homeowner loan instead lets you access the money you need without disturbing your existing deal or triggering those charges.
Borrowers Whose Lender Will Not Lend More
Your current lender might be willing to offer a further advance, which is additional borrowing on top of your existing mortgage. If they decline, or the amount on offer is not enough, a homeowner loan from a different lender is a logical next step.
Second charge lenders often have more flexible criteria than mainstream mortgage providers.
People with Some Credit Issues
Because the loan is secured against your property, second charge lenders are often more willing to consider applicants with a less than perfect credit history.
The security of the property reduces the lender’s risk, which is why they can be more accommodating on credit. That said, a weaker credit profile will affect the rate you are offered.
Those Who Need More Than an Unsecured Loan Allows
Personal loans are generally capped at around £25,000 for most mainstream lenders, and repayment terms rarely exceed seven years.
If you need £60,000, £100,000, or more for a large home renovation, business investment, or to consolidate several debts, a homeowner loan may be the only practical option outside of remortgaging.
It’s important to remember
Borrowing in this way uses up some of your equity and puts your home at risk. As homeowner loans have second charges they are more expensive that a standard mortgage.
It’s important to properly check the costs of remortgaging against taking on a home-owner loan. An independent mortgage broker will be able to help you with this.
Second Charge Mortgages
Specialist secured lending
What Can You Use the Money For?
Second charge lenders place very few restrictions on how you use the funds. As long as the purpose is legal, most lenders are not concerned with the reason.
Common uses include:
- Home improvements, extensions, and renovations
- Debt consolidation (combining multiple high-rate debts into one lower monthly payment)
- Business investment or working capital
- Paying a tax bill
- School or university fees
- Buying a vehicle or covering another major purchase
One caution on debt consolidation: while the monthly payment are likely to be lower, spreading shorter-term debts over a longer repayment period generally means paying more in total interest.
A good broker will run these numbers so you can see the full picture before you decide.
According to the Finance and Leasing Association (FLA), debt consolidation accounted for 58.3% of all new second charge mortgage agreements in 2025, with home improvements representing a further 12%.
A combined purpose of debt consolidation and home improvement made up 23% of new lending. These figures reflect the practical reality that most borrowers use homeowner loans to manage existing debt or invest in their property.
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What Does a Homeowner Loan Cost?
The interest rate on a homeowner loan sits somewhere between a standard mortgage rate and what you would pay on an unsecured personal loan.
The exact rate depends on your credit profile, the loan amount, the LTV, and the lender. Rates vary widely across lenders, so getting independent advice and comparing the full market is more important than focusing on headline figures.
Fees to Budget For
Beyond the interest, there are several costs to factor in before you apply:
- Arrangement fee: Most lenders charge a fee to set up the loan. This can sometimes be added to the loan balance, though you will then pay interest on it.
- Valuation fee: The lender’s surveyor needs to confirm your property value.
- Legal fees: Solicitors handle the charge registration. Some lenders contribute towards this cost.
- Broker fee: If you use a mortgage broker to arrange the loan, they will charge a fee for their advice and service.
It is worth getting a total cost comparison, not just a monthly payment figure.
The Annual Percentage Rate of Charge (APRC) reflects the full cost of the loan over its term and gives a better basis for comparing products side by side. The FCA requires all lenders to quote the APRC in their advertising and documentation, so you can use it as a direct comparison point between offers.
How Does a Homeowner Loan Compare to the Alternatives?
Before applying, it is worth understanding how a homeowner loan sits alongside the other options available to you.
Remortgage
If you are approaching the end of your current deal or have no early repayment charges, remortgaging to a new lender and releasing equity at the same time is often the cheapest route. Mortgage rates are generally lower than second charge rates.
The downside is the disruption to your existing mortgage and the time involved.
Further Advance
A further advance involves borrowing more from your current lender, secured on the same property. Because the lender already holds the first charge and knows your payment history, it can be a straightforward process. But your current lender may decline, may not offer the amount you need, or the rate may not be competitive.
Unsecured Personal Loan
Quicker to arrange and your property is not at risk, but personal loans are generally limited to £25,000 and carry higher rates.
If you need a smaller amount and can afford the monthly repayments without securing the debt against your home, this may be the more sensible choice.
A broker can compare all three options side by side based on your specific situation and give you a clear view of which makes financial sense.
| Option | Best for | Your existing mortgage | Approximate timeline |
|---|---|---|---|
| Homeowner loan | Locked into a fixed rate deal or lender won’t lend more | Stays in place | 2-4 weeks |
| Remortgage | Coming off a fixed rate or no early repayment charges | Replaced with new deal | 4-8 weeks |
| Further advance | Happy with current lender, needs small additional sum | Stays in place | 2-4 weeks |
| Personal loan | Smaller amounts up to £25,000 | Not affected | Days to 1 week |
What Are the Risks?
The most important thing to understand is that a homeowner loan puts your property at risk.
If you fall behind on repayments and the lender exhausts all other options, they have the legal right to apply for repossession. This is always a last resort and lenders must follow strict processes before reaching that point, but the risk is real.
Taking on a second charge also reduces your available equity.
This can affect your ability to remortgage in the future, move house, or release further funds. Make sure any loan you take out is genuinely affordable at the outset and consider what would happen to the repayments if your circumstances changed.
The Financial Conduct Authority (FCA) regulates homeowner loans secured against properties you live in. This means lenders must carry out affordability checks and you have rights as a borrower, including a seven-day reflection period after receiving a formal loan offer. You are under no obligation to accept the offer within that window.
Do You Need a Broker for a Homeowner Loan?
You are not required to use a mortgage broker, but it is strongly advisable.
The second charge market includes specialist lenders that do not deal directly with the public.
According to the Finance and Leasing Association, second charge mortgage new business reached its highest level since 2008 in 2025, with over £1.9 billion of new lending and 38,304 agreements completed in the 12 months to July 2025. The majority of this lending flows through brokers, not direct channels.
A whole-of-market broker has access to these lenders and can compare rates and terms across the full market, not just those available on the high street.
A good broker will also check whether a homeowner loan is the right choice in the first place. Sometimes a remortgage or a further advance makes more financial sense, and a broker with no incentive to push a particular product will give you that honest view.
At Respect Mortgages, we can introduce you to an experienced independent mortgage broker who can review your situation, compare all available options, and help you find the right solution.
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Frequently Asked Questions
There is no difference. They are two names for the same product. A homeowner loan is a secured loan taken out against the equity in your property, alongside your existing mortgage. It is registered at the Land Registry as a second charge, which is why it is also called a second charge mortgage. You may also see it referred to simply as a secured loan.
Yes. Homeowner loans are designed for people who already have a mortgage. You are borrowing a second sum secured on the same property, so having an existing mortgage is a requirement rather than a barrier. Your existing lender will need to give written consent before the second charge can be registered.
Loan amounts range from £10,000 to £500,000, with some specialist lenders going higher. The exact amount depends on how much equity you have in your property, your income, your outgoings, and the lender’s maximum LTV ratio. Most lenders will not allow combined borrowing across both loans to exceed 80% to 85% of your property’s value.
Yes. The new lender must contact your existing mortgage lender to request formal consent before registering the second charge. Your current lender can refuse, which would prevent the loan from proceeding on a legal charge basis. The second charge is also registered at the Land Registry and will appear on any future searches.
It is possible. Second charge lenders often apply more flexible criteria than mainstream mortgage lenders because the loan is secured against your property. Some will accept applicants with county court judgements, defaults, or a low credit score, though the rate offered will be higher to reflect the added risk. A broker can identify which lenders are likely to consider your application.
When you sell your home, the proceeds are used to repay your mortgage first, then the homeowner loan. You will need enough equity to cover both. Some lenders allow you to transfer the loan to a new property, subject to their approval and the new property meeting their criteria. If a transfer is not possible, you will need to repay the loan in full on or before completion.
