How HELOC loans work in the UK

The new way to use your home equity

Home Equity Lines of Credit - known as HELOCs - have arrived in the UK, giving homeowners a flexible way to borrow against the value they have built up in their property. Unlike a traditional lump-sum loan, a HELOC gives you a credit limit secured on your home. During a typical five-year draw period you can withdraw money as needed, repay when it suits, and only pay interest on the funds you have actually drawn. When the draw period ends, your outstanding balance converts into a standard repayment schedule for the remaining term, often taking the total facility to around 20 to 25 years.

For many, the appeal is precision. Renovating in phases, paying school fees term by term, or smoothing irregular costs like tax bills is often cheaper when you are not paying interest on unused funds. Because UK HELOCs are commonly set up as a second-charge, your existing mortgage stays in place. That means you can preserve a competitive fixed rate on your main mortgage while accessing additional funding separately.

Typical limits range from £10,000 up to £500,000 depending on equity and affordability, with combined borrowing usually capped at around 85% of your property value. Rates vary with your circumstances and provider, typically from around 2% to 10%, and many products allow penalty-free overpayments or full repayment during the draw period.

Used well, a HELOC can be a versatile, low-friction tool. Used poorly, it still carries serious obligations - it is secured on your home and missed payments can lead to repossession. The key is understanding how the facility works, matching it to a clear purpose, and borrowing only what you need.

A HELOC is flexible access to your equity - interest applies only to what you actually use.

Who it suits - and who should pause

A HELOC can suit UK homeowners with meaningful equity who need funds in stages rather than all at once. If you are planning a refurbishment that will run over months, supporting family with regular costs, or managing variable income, the ability to draw and repay flexibly can help control interest. Later-life borrowers and those with non-standard income may also benefit from specialist underwriting that looks beyond traditional mortgage rules. If your need is one-off and fixed - say, buying a car - a straightforward personal loan or a traditional second-charge might be more predictable.

Your flexible funding choices

1. HELOC for phased home improvements - draw as each stage begins.

2. HELOC to smooth school fees - withdraw term by term only.

3. HELOC for debt consolidation - replace higher-cost borrowing sensibly.

4. HELOC as contingency - keep a limit available for emergencies.

5. Traditional second-charge loan - fixed lump sum and fixed repayments.

6. Remortgage to raise capital - replace your main mortgage deal entirely.

What it costs and how it impacts you

Can you qualify

Eligibility rests on three pillars - equity, affordability, and credit profile. Most UK HELOCs are available to homeowners who have owned their property for at least six months and have sufficient equity after accounting for the existing mortgage. Lenders typically cap combined borrowing at around 85% of the property value, with facility sizes from £10,000 up to £500,000 depending on circumstances.

Your income - salary, self-employed earnings, pension, or rental income - must support the limit you want. Lenders often use flexible affordability models, sometimes allowing income multiples near six times depending on case strength. A clean credit history helps, though specialist options exist for minor blips. Age limits usually extend to around 85 at the end of the term, with higher caps sometimes available for joint applications.

Importantly, a UK HELOC is usually a second-charge facility, so your current mortgage remains untouched. That can be valuable if your main deal is competitive or you are mid-fix and want to avoid remortgage penalties. If you are unsure how much you could reasonably borrow, Kandoo can match your profile to suitable providers and outline the likely costs before you proceed.

From application to access - step by step

1. Check equity, goals, and affordable monthly budget.

2. Get an indicative quote and eligibility assessment.

3. Provide documents - ID, income, mortgage statement, bank statements.

4. Property value confirmed - desktop or full valuation.

5. Facility agreed - credit limit, pricing, fees, and terms.

6. Legal work completed and second-charge registered.

7. Draw funds when needed - pay interest on drawn amounts only.

8. Overpay anytime to reduce interest and future repayments.

Advantages and trade-offs

Read this before you sign

A HELOC should fit a clear, time-bound plan. If you expect large one-off spending, a fixed second-charge or remortgage can sometimes be cheaper overall. Variable rates mean your cost can change, so build a buffer into your budget and test affordability at higher rates. Remember that once the draw period ends, you cannot take new funds and your remaining balance will switch to fixed monthly repayments. That can feel very different from the light-touch payments during drawdown. Keep records of how and when you draw - especially for renovations and education - and consider overpaying whenever spare cash arrives to reduce interest immediately.

Alternatives to consider

1. Remortgage with capital raise - one new mortgage, single payment.

2. Second-charge fixed loan - lump sum with known monthly cost.

3. Offset mortgage - use savings to reduce interest daily.

4. Personal loan - unsecured borrowing for smaller, fixed needs.

5. Credit card with promotional rate - short-term, disciplined use only.

Frequently asked questions

Q: How much can I borrow with a UK HELOC? A: Limits typically range from £10,000 to £500,000 subject to affordability and equity, with combined borrowing usually capped at around 85% of your property value including your existing mortgage.

Q: Do I pay interest on the whole limit or only what I use? A: You pay interest only on funds you draw. If you do not withdraw, no interest applies. Minimum monthly payments will still be required during the draw period.

Q: What happens after the five-year draw period? A: You can no longer withdraw new funds. Your outstanding balance converts into a standard repayment schedule for the remaining term, bringing certainty and clearing the debt over time.

Q: Will a HELOC affect my current mortgage deal? A: Most UK HELOCs are set up as a second-charge, leaving your first mortgage untouched. You keep your existing rate and terms while accessing extra funds separately.

Q: Are there early repayment charges? A: Many HELOCs allow partial or full repayments without penalty during the draw period. Always check your specific terms, as fees and conditions can vary by provider.

Q: What can I use a HELOC for? A: Typical uses include home improvements, education costs, debt consolidation, or managing irregular expenses. It cannot be used for business purposes, gambling, or property deposits.

Ready to explore your options

If flexible access to home equity fits your plans, Kandoo can help you compare UK HELOCs alongside remortgaging and second-charge alternatives. We will review your equity, budget, and goals to match you with suitable lenders and a clear illustration of costs. Speak with us today and get a decision in principle quickly so you can plan with confidence.

Important information

This guide is for information only and does not constitute advice. A HELOC is secured on your home - if you do not keep up repayments, your property may be repossessed. Product availability, fees, and rates can change. Always assess affordability carefully.