"Home equity loan" is a term borrowed from the US mortgage market and used by UK consumers searching for ways to release money tied up in their property. The UK does not have a product called a "home equity loan" in the strict American sense. What UK borrowers asking this question typically need is a second-charge mortgage, a remortgage with capital raise, or in some cases a further advance from their existing first-charge lender. This article explains what UK borrowers really get when they search for "home equity loans", how the UK products work, and how to choose between them.
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TL;DR The product: the UK doesn't have a "home equity loan" in the American sense. The closest equivalent is a second-charge mortgage. Three UK routes: second-charge mortgage, remortgage with capital raise, further advance from current lender. Equity release / lifetime mortgages are different again. Over-55s only, interest rolls up. How much you can release: usually capped at 75-85 percent combined LTV across all charges. |
What "home equity loan" means in the UK context
In the United States, a "home equity loan" is a specific product: a fixed-rate, lump-sum second-charge loan secured against the borrower's home, typically with a 5-30 year term. UK lenders do not market a product under the "home equity loan" name, but the underlying use case (releasing equity from your home as a lump sum) is well served by three UK products.
| UK product | US "home equity loan" equivalent? |
|---|---|
| Second-charge mortgage | Closest direct equivalent: lump-sum loan secured behind existing first mortgage |
| Remortgage with capital raise | Functionally similar, but replaces the first mortgage rather than sitting behind it |
| Further advance | Lump-sum top-up from existing first-charge lender; functionally similar |
| Home Equity Line of Credit (HELOC), US term | Not a standard UK product; some second-charge "drawdown" products such as Selina Finance offer something comparable |
| Equity release / lifetime mortgage | Different: for over-55s only; interest typically rolls up rather than being paid monthly |
The three main UK routes to release home equity
Route 1: Second-charge mortgage
A new lender adds a second charge against your home behind your existing first mortgage. The two run in parallel: each has its own monthly payment, rate, and term. Best for borrowers tied into a low fixed-rate first mortgage with high early repayment charges, or who need to complete quickly. Typical timeline: 3-6 weeks. Regulated by the FCA under FCA MCOB.
Route 2: Remortgage with capital raise
The existing first mortgage is replaced with a larger one. The "capital raise" portion is paid out as cash, the existing first mortgage is cleared on completion, and you have one new larger mortgage going forward. Best for borrowers near the end of their fixed period, or where a full mortgage restructure makes financial sense. Typical timeline: 6-12 weeks.
Route 3: Further advance
Your existing first-charge lender tops up the existing mortgage. The first mortgage continues with its existing structure but at a higher balance. Best for borrowers who want to stay with the current lender and whose lender's product range is competitive for the capital raise. Typical timeline: 4-8 weeks.
How much UK home equity you can release
The cap is set by combined loan-to-value: total of all secured borrowing against the property divided by the property's market value. Mainstream UK lenders typically cap combined LTV at:
| Route | Typical maximum combined LTV |
|---|---|
| Second-charge mortgage | 75-85% (specialist lenders may go to 90% in narrow cases) |
| Remortgage with capital raise | 75-90% depending on lender and credit profile |
| Further advance | Set by your existing lender; usually 75-90% |
| Equity release (over-55s only) | Linked to age; typically 20% at 55, rising to 50%+ at 80 |
For a £400,000 property with £200,000 outstanding on the existing mortgage, an 80 percent combined LTV cap allows total borrowing of £320,000, leaving £120,000 of headroom for capital release. The actual figure offered will be the lower of this and what affordability allows.
Affordability assessment
UK lenders apply the affordability rules in FCA MCOB 11. They calculate whether you can afford the new monthly commitment alongside existing committed expenditure under stress-tested rates (typically 1-3 percentage points above the offered rate).
For most borrowers with reasonable equity, affordability is the binding constraint, not LTV. Factors that worsen affordability:
- Multiple existing credit commitments (car finance, credit cards, personal loans).
- Income variability (self-employed, contractor, commission-based).
- Recent address or employment changes.
- Large household commitments (school fees, dependants).
Choosing between the three routes
| Situation | Best route |
|---|---|
| Tied into low fixed-rate first mortgage with high ERCs | Second-charge mortgage (preserves the first-mortgage rate) |
| Near end of fixed period on first mortgage | Remortgage with capital raise |
| On standard variable rate already | Remortgage with capital raise (no rate to preserve) |
| Want to stay with current lender | Further advance |
| Have adverse credit on file | Specialist second-charge mortgage; mainstream remortgage may not be available |
| Need funds quickly | Second-charge mortgage (3-6 weeks vs 6-12 for remortgage) |
| Self-employed under 2 years | Specialist second-charge lenders accept; mainstream remortgage often declines |
| Aged 55+ and don't want monthly payments | Equity release / lifetime mortgage (separate product, separate regulation) |
Costs to compare across routes
| Cost component | Second-charge mortgage | Remortgage with capital raise | Further advance |
|---|---|---|---|
| Interest rate | Higher than first-charge rates | Mainstream first-charge rates | Mainstream first-charge rates |
| Setup fees | £500-£2,500 arrangement; broker fee may apply | £500-£2,000 arrangement plus existing mortgage ERC | Often zero or minimal admin fee |
| Existing first-mortgage ERC | Not paid (first mortgage stays in place) | Pays the ERC if breaking a fixed period | Not paid (existing mortgage continues) |
| HM Land Registry fee | Yes, on the new charge | Yes, on the new charge replacing the old | No new charge needed; existing charge updated |
| Legal fees | £200-£800 | £500-£1,500 typical | Often zero |
| Total time to drawdown | 3-6 weeks | 6-12 weeks | 4-8 weeks |
Always compare APRC (Annual Percentage Rate of Charge) across all three routes on the same loan amount and same realistic holding period. APRC is the FCA-regulated total cost figure under MCOB 10A.
What you cannot do with home equity in the UK
- Open a HELOC like in the US. True revolving home-equity lines of credit are rare in the UK. Some second-charge lenders offer "drawdown" facilities that share some features (Selina Finance has one), but they are not the standard product.
- Get an interest-only home equity loan as standard. UK regulators tightened interest-only mortgage criteria after 2014; capital and interest is the default. Some second-charge lenders offer interest-only on niche cases.
- Skip affordability checks. All UK regulated home-equity routes require full FCA affordability assessment. There is no "asset-based" lending in the consumer market that bypasses income checks.
Risks specific to releasing UK home equity
- Property at risk. All three routes are secured against your home; default consequences are severe.
- Combined LTV exposure. Higher combined LTV reduces equity cushion against falling property prices.
- Term extension. Spreading borrowing over 25-30 years multiplies lifetime interest, even at lower rates.
- ERC lock-in. Most products carry ERCs in the early years; refinancing early can be expensive.
- Loss of unsecured-credit protections. Rolling unsecured debts into home-equity borrowing removes Section 75 protection under the Consumer Credit Act 1974.
Free guidance on home-equity decisions is at MoneyHelper. Free debt advice is at StepChange and National Debtline.
Primary sources
- FCA Mortgage Conduct of Business handbook: handbook.fca.org.uk/handbook/MCOB/
- FCA Register: register.fca.org.uk
- HM Land Registry: gov.uk/guidance/hm-land-registry-registration-services-fees
- Equity Release Council (over-55s): equityreleasecouncil.com
- MoneyHelper: moneyhelper.org.uk
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Disclaimer: This article is editorial information only and does not constitute financial advice or a recommendation of any specific product or lender. Mortgages and second-charge mortgages are regulated by the Financial Conduct Authority. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. Always consult an FCA-authorised mortgage broker or adviser for personalised guidance, and verify lender details on the FCA Register before making any decision. |
Frequently asked questions
Does the UK have anything called a "home equity loan"?
Not under that exact name. UK borrowers searching for "home equity loan" are typically directed to second-charge mortgages, remortgage with capital raise, or further advance products, depending on their case. Some specialist lenders use "home equity loan" or "homeowner loan" in marketing, but the underlying legal product is a second-charge mortgage.
Is a home equity loan the same as equity release?
No. Equity release (or "lifetime mortgage") is a specific UK product for over-55s where interest typically rolls up rather than being paid monthly, and the loan is repaid when the property is sold (usually on death or move into care). It is regulated separately from standard mortgages and has its own consumer body, the Equity Release Council.
How much can I borrow against my UK home equity?
Typically up to 75-85 percent of the property's value, minus any existing first-charge mortgage balance, subject to affordability. Specialist lenders may go higher (90 percent combined LTV) on selected cases. Equity release for over-55s starts lower and rises with age.
Can I get a fixed-rate home equity loan in the UK?
Yes. Most UK second-charge mortgages and remortgages offer fixed-rate options, typically 2, 3, 5, or 10-year fixes. After the fixed period, the loan reverts to the lender's standard variable rate.
How does releasing home equity affect my credit score?
Like any new credit, a home-equity release adds a new commitment to your credit file and produces a temporary score dip from the hard credit search. Successful payments over time improve your score by demonstrating credit discipline on a large commitment.
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FIND AN FCA-AUTHORISED MORTGAGE BROKER A whole-of-market broker can compare second-charge, remortgage, and further advance routes on your actual figures, and identify which lender is most likely to approve at the lowest APRC. The KFI directory lists FCA-authorised mortgage brokers across the UK, filterable by region and specialism. All firms shown are verified against the FCA Register at the time of listing. |