No Equity Home Improvements Loan

It used to be virtually impossible to get a loan based on your mortgage or property value if you were in a no equity or negative equity situation. Many lenders took the view that this meant that your property would be of no value to them if you defaulted on your repayments. So, they wouldn't lend you any more money. People had to take out a standard loan package to get the money they wanted and often lost on on the good mortgage rates an equity package brings with it.

The situation today, however, is much brighter in the no equity home improvements loan stakes and an increasing number of finance companies have listened to consumers and changed the products they offer to accomodate more homeowners. This has led to a flood of no equity home improvements loan services hitting the market. The percentage amount you will be offered with this type of no equity home improvements loan will vary but when you compare loans from differnet lenders you will find that some lenders will offer up to 125% of the current value of your property. This could mount up to a tidy sum so that you can make the improvements you really want!

What is a No Equity Home Improvements Loan?

So, just what is a no equity loan? Well, it's also known as a negative equity loan and it basically means that you have no free money or not enough money to be released from your property value to pay for any given project. Say, for example, your property is worth £150,000 and your existing mortgage is £140,000. You want to get hold of £20,000 to pay for some improvements. On your current standing, you only have the capacity to take £10,000 out for a standard loan. You'll have to look at a no equity option.

So, if you take out a no equity home improvements loan for the £20,000 your loans will now total £160,000. The key thing to remember with this kind of option is that you will be making your debt on your property larger than its potential value. This isn't a problem if you don't intend moving immediately and just want to add something to your home such as a new kitchen, bathroom or windows to make it more comfortable. And, the same applies if the home improvements you are planning will increase its value anyway.

Your next question will probably be - what are the catches? After all the no equity home improvements loan company is taking a risk by giving you this kind of deal. The short answer, as always, will be found in the interest rates. You won't get as good a deal as you might if you could release cash in the normal way but you should still be able to get a very good deal by shopping around. The very fact that your home can be used as security will help your application no end. Try talking to a good broker as a first step - they're an invaluable source of advice on interest rates and market conditions. They may even be able to help you get the best deal.

You'll generally find that the major names in the market aren't the people you'll end up talking to - they will usually cap loans at 95% of your property value. You'll probably need to speak to a no equity home improvements loan specialist to get what you want. The lending process itself here may be a little more in-depth than if you were looking for a straight cash release scheme and these lenders tend to want a better credit score than normal to make them feel better about your ability to pay. But this is, after all, a small price to pay in your quest to create your dream home!