A home equity loan is a loan that is secured on your property. If you have equity in your home – the difference between your property’s value and any outstanding mortgages/secured loans – then you can borrow some or all of this equity.

A home equity loan involves the lender taking a legal ‘charge’ over your home as security for the loan. This means that your home is at risk if you don’t keep up repayments on the loan.

Your interest rate will depend on three main factors. Firstly, it will depend on the proportion of your home’s value that you wish to borrow. Generally speaking, the higher your ‘loan to value’, the higher your interest rate will be.

Secondly, your interest rate will be determined by the type of loan product that you want. There may be a choice of fixed or variable interest rates and so your rate will depend on the product that you choose.

Finally, your interest rate will be determined by your credit history. If you have a less than perfect credit history – perhaps you have a County Court Judgment or default – then you may pay a higher interest rate than other applicants.

You can use the equity loan for almost any purpose. Many people use home equity loans to raise cash to consolidate other debts such as credit cards or personal loans. As well as simplifying your finances and reducing your monthly outgoings you can also often find that you pay a lower interest rate.

You can also use the loan to fund home improvements. Whether you want to convert your loft, fit a new kitchen or bathroom, build an extension, landscape your garden, repair your roof, install central heating or redecorate your home, a home equity loan can provide the money that you need.

In addition, you can also use it for a range of other purposes. You may want to pay for a one off purchase such as a wedding, dream holiday or new car or you may want to help your child through university or college. Others use home equity loans to fund their business or to buy a second property.

A remortgage involves switching your entire mortgage from one lender to another and, often, borrowing additional funds in the process. A home equity loan means your mortgage remains with your current lender and you take out a separate loan with another provider.

A home equity loan is a useful alternative to a remortgage if you don’t want to switch your main mortgage – perhaps you are benefiting from an excellent mortgage deal – or if you are struggling to obtain an agreement for a remortgage.

Yes. While many banks are reluctant to agree to loans and credit cards for self employed applicants, home equity loans are readily available. Even if you are struggling to prove your income – perhaps because you don’t have three year’s company accounts or because you are newly self employed – a home equity loan provider will be happy to consider your application.

If you sell your home then your home equity loan will have to be repaid along with any other secured loans or mortgages.

If you subsequently buy another property you may be able to apply for a home equity loan on your new home, depending on your income and the amount of equity you have.