Many UK homeowners are finding that their disposable income does not go as far right now due to the cost-of-living crisis. This means many are struggling to afford to maintain their lifestyle, which is frustrating when you have significant equity tied up in the house. Fortunately, there is property-backed finance available that can help you access some of this equity that could be used to support renovations, debt consolidation, or large one-off purchases. Read on to find out more.
What Equity Actually Means
First, it is helpful to understand exactly what is meant by equity, including how it is calculated and what affects its growth. Essentially, this is the part of the property that you actually own. This is calculated by subtracting the outstanding balance on your mortgage from the property’s current market value. Equity can grow as you pay more of your mortgage off over time, as well as through increases in the value of your property.
When Using Home Equity Makes Sense
There are many situations where it makes sense to access and use your home equity. Home improvements are one option, as this allows you to use the equity to improve your life at home as well as add value to the property. Many people also use equity to support family, such as putting the kids through university or helping them with a deposit on their first home UK homeowners.
Understanding Homeowner Borrowing Options
Secured lending products can be an effective tool for those looking to borrow money. Essentially, these are loans that are secured by the property – this can provide access to higher loan amounts and longer repayment terms compared to unsecured borrowing, as there is less risk for the lender. Homeowner loans are designed specifically for property owners, with the ability to unlock the equity in your home without having to remortgage.
Risks, Safeguards, & Long-Term Planning
As with any type of borrowing, there are risks involved, and you need to fully understand what you are signing up for. You are putting your property up as collateral, so it is vital that you are able to afford repayments. It is also always a good idea to compare lenders, understand interest rates and fees, and read the small print. You should also think ahead to the future and plans that might affect your ability to repay, such as paying for a wedding or having a child.
Unlocking equity can be a great option for homeowners looking to fund a major life expense or simply improve their living standards. The advice in this post should help you make an informed decision and secure the best loan for your needs.