Can you get a secured loan with no mortgage?

No. If you have paid off your mortgage and own your property outright, you can’t take out a secured loan against it.

But this doesn’t mean you can’t use your home as security to raise money at all. If you own all the equity in your property – or a good chunk of it – you can remortgage to raise the funds you need.

Secured loan without a mortgage

If you have finished repaying your mortgage and own your home outright, it’s not possible to take out a secured loan.

Also known as a second-charge mortgage, secured loan payments are a secondary priority to your mortgage. Generally speaking, mortgages have lower interest rates than other types of loan, so if you have cleared your previous mortgage and want to borrow, it is likely to be cheaper to take out a new mortgage.

Secured loan with a mortgage

If you are still repaying the mortgage on your property, you do have the option of taking out a secured loan. If you do, your mortgage provider will take priority over your secured loan lender.

This means that if you stop making your repayments and your home is repossessed, after your mortgage provider has recovered their costs, your secured lender will be able to recover their costs.

If the sale of the property does not raise what’s needed to cover the amount you owe to both your mortgage and secured loan providers, you will remain in debt.

You may still be charged interest on this shortfall. If this is the case, you should receive regular financial statements from the lender to let you know how much you owe.

The lender you are in shortfall to may or may not pursue the shortfall debt. If they do chase the outstanding debt, they must notify you within six years.

Does being a homeowner mean you’re guaranteed to be accepted for a secured loan?

No. Your secured loan application could still be rejected even if you own your home and have a mortgage.

Although having equity in a property is a key requirement to be eligible for a secured loan, there are a number of other things lenders take into consideration.

Factors such as your credit history, the amount of equity you have in your home, your annual income and how long you’ve lived at your current address will all play a part as well.

Is a secured loan the right option for me?

This is a question only you can answer. You should only take out a secured loan if you are confident you can meet your monthly repayments on time and in full each month.

If you opt to take out a secured loan while you are still repaying a mortgage, remember there is the pressure of two monthly repayments to stick to. If you’d prefer to make just one payment, you could consider remortgaging instead.