The pros and cons of securing a loan against your home

Why homeowners are weighing up secured borrowing in 2025

Rising living costs and uneven wage growth have pushed more UK households to explore ways of unlocking value from their homes. At the same time, property and mortgage markets show renewed momentum. The FCA reports gross mortgage advances up 50.4% year-on-year in Q1 2025, the strongest since late 2022, indicating lenders are very much open for business. Buy-to-let is also lively, with Q1 2025 lending up 38.6% by volume and rental yields nudging 6.94%. That resurgence reflects improved confidence, but it also means borrowers face a more complex choice set and must navigate pricing, criteria and product structures carefully.

One option drawing attention is the secured loan, sometimes called a homeowner loan or second charge mortgage. Unlike unsecured personal loans, secured borrowing uses your property as collateral. The pay-off is typically access to larger sums and potentially lower monthly payments than comparable unsecured credit. The tension is the risk: fall behind, and your home could be at risk of repossession. This is why clarity matters before you sign anything.

Later life lending is also expanding, now representing 7.6% of all residential loans and over a fifth of buy-to-let loans. Equity release - a subset of later life lending - grew 10% year-on-year in Q2 2025, with average lump sums up 14% to £126,422. That tells us more older homeowners are leaning on property wealth to manage debt, support family or supplement retirement income. Yet the cost of access is moving. Average equity release rates rose to 7.15% in Q1 2025 from 6.67% a year earlier, which can materially change lifetime borrowing costs.

If you are considering securing a loan against your home, the right approach is measured and evidence-led. Understand how the product works, what it costs today, how it could change tomorrow and where it sits among alternatives like remortgaging, unsecured loans or even doing nothing for now. Kandoo is a UK-based retail finance broker, so our focus is matching consumers with suitable solutions and making the trade-offs transparent.

Understanding APR is not just about percentages - it is about grasping the pounds-and-pence impact on your monthly budget and long-term equity.

Bottom line: secured loans can be powerful tools when used judiciously. The market backdrop is supportive, but the decision still hinges on affordability, time horizon and your appetite for risk to your property.

Who should consider this - and who should not

A secured loan can be sensible if you need a substantial sum, want to spread repayments over a longer term, or hold fixed-rate mortgage terms you do not want to disturb with a full remortgage. It may also help consolidate expensive revolving debts into a structured plan at a lower monthly outgoing, provided you maintain discipline and avoid re-accumulating balances.

However, if your income is unstable or you are already stretched, adding debt against your home may amplify risks. For older homeowners, equity release can provide flexibility, but rising rates mean you should model outcomes carefully and compare with downsizing or a retirement interest-only mortgage. For landlords, the buoyant buy-to-let lending environment hints at opportunity, yet leverage magnifies both returns and losses. The best candidates approach this with a clear objective, a realistic budget and a plan for rate changes.

Key terms explained clearly

• Loan to value (LTV) - The size of your secured loan as a percentage of your property value after accounting for your existing mortgage. Lower LTV typically unlocks better pricing.

• Second charge mortgage - A secured loan that sits behind your first mortgage. Your main lender gets repaid first if the property is sold.

• APRC - The annual percentage rate of charge, designed to show the total cost of borrowing including fees, assuming you keep the loan for the full term.

• Equity release - Later life products, often lifetime mortgages, letting over-55s access home equity without monthly repayments. Interest rolls up and is repaid from the estate or sale.

• Early repayment charge (ERC) - A fee for paying off a loan before the agreed end date. Can apply to secured loans and mortgages.

• Affordability assessment - Lenders test your income, outgoings and credit to judge whether repayments are sustainable under stress.

• Drawdown - In equity release, the ability to take funds in stages rather than one lump sum, potentially reducing interest roll-up.

Your main routes to secure borrowing

1. Second charge homeowner loan

   • Keeps your current mortgage untouched while raising additional funds. Useful if your first mortgage rate is competitive or has hefty ERCs. Terms can be flexible, but rates reflect risk and LTV.

2. Full remortgage with additional borrowing

   • Replace your existing mortgage and take extra funds in one product. Simpler to manage, potentially cheaper if you can access top-tier rates. Not ideal if ERCs are high or your current fix is very competitive.

3. Further advance from your current lender

   • Add borrowing to your existing mortgage without changing the full deal. Often convenient with streamlined underwriting, though pricing may be higher than headline remortgage rates.

4. Equity release for over-55s

   • Access cash without monthly repayments. The market is resilient with 10% annual growth in Q2 2025, but average rates around 7.15% increase lifetime costs. Consider drawdown options to manage roll-up.

5. Buy-to-let secured borrowing

   • For landlords, rising lending volumes and yields near 6.94% signal opportunity. Affordability is based on rental coverage and stress tests. Void periods and rate rises remain key risks.

What it could cost you - and what you could gain

Who typically qualifies

Lenders focus on three pillars: equity, affordability and credit conduct. You will need sufficient equity after your existing mortgage to support the new borrowing at an acceptable LTV. Affordability checks assess your income, committed outgoings and how resilient you would be to higher rates. Credit history still matters, though secured lenders can be more flexible than unsecured providers, especially for borrowers seeking consolidation or with historic blips.

Homeowners on competitive fixed-rate mortgages often lean toward second charges to avoid early repayment charges or losing a favourable rate. Those nearing or in retirement might look to equity release, where the assessment is different and based on age, property value and product safeguards rather than conventional income multiples. Landlords will be judged on rental coverage and stress tests aligned to current interest rate conditions. In every case, documentation and verifiable income strengthen your position.

Step-by-step to getting a secured loan

1. Define the exact borrowing need and purpose.

2. Check equity, credit files and monthly budget.

3. Compare second charge, remortgage and further advance.

4. Obtain personalised quotes with full fee breakdowns.

5. Pass affordability and property valuation checks.

6. Review terms, ERCs and portability clauses.

7. Complete legal work and sign loan documents.

8. Receive funds and set up repayments.

Advantages and drawbacks at a glance

Red flags and smart checks before you sign

Before committing, stress-test your budget at higher interest rates and consider the full cost including fees over the entire term. If consolidating debt, close or reduce limits on old accounts to avoid running balances back up. For equity release, compare lump sum and drawdown, model longevity and discuss implications with family. Investors should model rental coverage under voids and rate shocks. Always compare second charges with remortgaging and further advances, factoring in any early repayment charges on your current deal. Independent advice helps ensure the product fits your life stage, not just today’s rate sheet.

Sensible alternatives to consider

1. Unsecured personal loan for smaller sums and shorter terms.

2. Remortgage at a competitive fixed rate if ERCs are minimal.

3. Further advance with your current lender for convenience.

4. 0% balance transfer or low-rate money transfer cards for short-term needs.

5. Retirement interest-only or downsizing instead of equity release for over-55s.

Frequently asked questions

Q: How risky is a secured loan compared with a personal loan? A: Secured loans use your home as collateral, so missed payments can lead to repossession. Personal loans do not carry property risk but may have higher rates or lower limits.

Q: When does a second charge beat a remortgage? A: If your existing mortgage has steep ERCs or a very favourable rate, a second charge can raise funds without disturbing it. Always compare total cost of credit.

Q: Are equity release rates competitive right now? A: Equity release remains popular, but average rates rose to around 7.15% in Q1 2025. That increases lifetime costs, so consider drawdown and alternatives like RIO mortgages or downsizing.

Q: Can I get a secured loan with imperfect credit? A: Often yes. Secured lenders may be more flexible than unsecured providers, but pricing reflects risk. Sustainable affordability is essential to protect your home.

Q: How much can I borrow against my home? A: It depends on your property value, existing mortgage, desired LTV, income and credit. Lenders cap LTVs to keep risk in check and will verify affordability.

Q: What is driving market activity in 2025? A: Stronger lending volumes across mortgages and buy-to-let, plus 10% growth in equity release lending, point to resilient demand. Pricing and criteria still vary by borrower profile.

Ready to move forward

If a secured loan looks appropriate, gather your documents, clarify the purpose and request personalised quotes that include all fees and conditions. Ask for scenarios at higher rates and different terms so you can see the trade-offs clearly. Kandoo can help you compare second charges, remortgages and later life options from UK lenders in minutes and connect you with regulated advice where required.

Important information

This guide is for information only and is not personalised financial advice. Secured borrowing puts your home at risk if you do not keep up repayments. Always consider independent advice and read lender documents carefully before committing.