Compare secured loans by home equity
Bigger equity often means better deals - here's how to make it work in your favour.
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How Home Equity Shapes Secured Loans
Home equity isn't just a number - it's your financial leverage. The more equity you've built up in your home, the more options (and better rates) you'll likely have when it comes to secured loans. Let's decode how your home's value can work for you - not against.
What is home equity?
Home equity is the part of your property you own outright. If your home is worth £300,000 and you still owe £180,000 on your mortgage, your equity is £120,000. It's what secured lenders look at when deciding how much to lend - and on what terms.
Here's how it affects your secured loan:
- More equity = lower risk for the lender - so better rates for you
- Lower equity = limited options, especially if you've borrowed recently
- Loan-to-value (LTV) ratio is key - most lenders cap this around 70–85%
- You may unlock larger loan amounts with more equity to back it
How to use high equity
If your property's gone up in value - or you've paid down your mortgage - you're in a strong position. Lenders value high-equity borrowers because you're seen as low risk.
Here's how to turn your equity into leverage:
- Push for better rates - you've earned them
- Borrow larger amounts if needed, e.g. for home improvements or consolidating debt
- Negotiate terms - such as lower fees or more flexible repayment options
- Go past the high-street - specialist lenders often give better rates to high-equity homeowners
What if your equity is low?
Don't panic - low equity doesn't shut the door to secured loans. But you'll need to be more strategic.
You could approach it like this:
- Borrow less - a smaller loan size may still be approved
- Try niche lenders who cater to low-LTV borrowers
- Improve your credit to help offset equity limitations
- Wait it out - if the market is rising, your equity might grow with time
- Avoid risky lenders who prey on low-equity borrowers with high interest rates
Summing up
In short: equity gives lenders confidence, and confidence gets you better deals. Whether you have a lot or just a little, understanding how equity shapes your loan options is crucial. If you're not sure where you stand, always get advice - a secured loan still means your home is at risk if you can't repay.
Frequently Asked Questions: Secured Loans
What's the minimum equity I need for a secured loan?
Most lenders want you to have at least 15–20% equity in your home before they'll consider offering a secured loan. That means your mortgage should not cover more than 80–85% of your property's market value. Some specialist lenders may go slightly higher, especially if your credit history is strong. Keep in mind that the less equity you have, the higher interest rates and borrowing limits may be.
How do I calculate my home equity?
It's simple: take your home's current market value and subtract your outstanding mortgage balance. So, if your home is worth £400,000 and you still owe £100,000, your equity is £300,000. You can get a rough estimate from recent sales in your area, but lenders will often need a formal valuation during the application.
Can I increase my equity before applying?
Yes - and doing so could help you secure better rates, terms, or loan amounts. The two main ways to increase your equity are paying down your mortgage through regular or overpayments, and increasing your home's value by making improvements, like a loft conversion or new bathroom. You can also wait for property prices to rise, although that depends on market conditions.
Will my credit score matter if I have high equity?
Yes, it still matters. Even with strong equity, lenders will assess your credit history, income stability, and affordability. Equity reduces their risk, but your credit profile shows how reliably you've managed debt in the past. A good credit score, combined with high equity, often unlocks the most competitive interest rates and loan terms.
What's a good loan-to-value ratio for secured loans?
A loan-to-value ratio (LTV) compares the total debt on your home (mortgage + secured loan) to its market value. For example, if your home is worth £250,000 and your combined borrowing is £175,000, your LTV is 70%. Most lenders aim for an LTV under 75% for secured loans, although some stretch to 85% in certain cases. The lower your LTV, the less risky you appear, which usually means a better deal.
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