How can you borrow against your home?

There are two main ways that you can borrow money against your home:

  1. 1.

    A secured loan: A loan that is secured against the value of an asset, usually your property. You can compare secured loan rates here.

  2. 2.

    A further advance: This lets you take on more borrowing from your existing mortgage lender. The rate is usually different to your main mortgage, but the additional funds are secured against the value of your home.

For both options you are putting forward your home as a guarantee that you will repay the money you borrow in full and on time.

What is the best way to borrow against your home?

It depends on your reason for borrowing, but typically:

  • If you need to borrow a large sum of money and want a long repayment term, you should consider a secured loan.

  • If you want to make home improvements or raise a deposit for a second property, you should consider a further advance.

You should never borrow money against your home to pay off existing debt. Here is how to pay off your debts.

What are the risks?

The main drawback is that you are putting your property at risk.

By offering your home as security you are giving the lender a legal claim to your property should you be unable to repay your borrowing for any reason at a later date.

This means that if you fail to keep to the agreed repayment plan, the lender could repossess your property or force the sale of your home in lieu of repayment.

What are the benefits?

There are two main benefits of applying for a secured loan;

  • Being able to borrow more

  • Potentially cheaper borrowing

Ability to borrow more

If you need to borrow a large amount (over 25,000), a secured loan may be your only option.

How much you can borrow depends on;

Cheaper borrowing?

Secured loans can sometimes be a cheaper option because the lender has collateral for the loan, rather than simply your word you will repay, especially if you need a significant amount.

However, this is now rarely the case as personal loan rates have fallen and are now often the cheapest option.

Check the cost of both options before you make a decision, as the difference between secured and unsecured personal loan rates is not as great as it used to be.

Poor credit borrowing

If you have a poor credit record and are unable to secure a standard personal loan you may have more success applying for a secured loan.

Secured loans are viewed as being less risky by the lender, as if you default they could reclaim the outstanding debt from your property.

Although this may sound like an attractive option, if you have had difficulties managing credit in the past you will need to think carefully before putting your property at risk by applying for a secured loan or taking out a further advance on your mortgage.

Additionally if you have a poor credit rating, the cost of your borrowing is likely to be high, even if you are securing the loan against your home.

Do you need income protection?

If you increase the borrowing secured against your home it is worth thinking about insuring your income.

Income protection is especially important if you would struggle to repay your existing mortgage, bills and your new loan if you lost your job.

What are the alternatives?

There are a number of other ways to get the borrowing you need including:

  • An unsecured home improvement loan: Some lenders offer larger unsecured loans if you use them to make home improvements. You can compare home improvement loans here .

  • A social loan: Where you borrow from other savers online. Peer to peer loans often have low interest rates because their lending costs are smaller than traditional lenders. Find out how peer to peer loans work, and compare social loan rates.

  • A credit card: If you want a more flexible way to borrow then a credit card could be an option. You can check our credit card comparison to see whether any of the cards available suit your requirements.

How to get the best secured loan

If you decide that a secured loan is best choice then you need to get the cheapest deal on your borrowing possible.

Look for a secured loan with the lowest possible interest rate to keep the cost of your borrowing to a minimum.

You can compare secured loans side by side using our secured loans comparison table.