New fintech, Selina Advance today announces it will be the first in the UK to launch a Home Equity Line of Credit (HELOC) direct to UK homeowners – offering a new affordable and flexible form of lending to finance large purchases.
Widely used in the US, Canada and Australia, Selina Advance has bought HELOCs to the UK to offer homeowners who have built up equity in their home – and wish to make a big purchase or fund home improvements – a new route to finance without the cost and complications of traditional loans or having to remortgage.
Targeted at affluent homeowners, consumers are able to borrow (in the form of a line of credit to drawdown on as they choose) between £25,000 up to £1million with an APRC representative of 4.96% (rates starting at 3.95%) and terms ranging from five to 30 years (see illustration 1).
Hubert Fenwick, Co-founder, Selina Advance, said: “HELOCs offer a new way for homeowners to finance their lifestyle; perfect for those who have worked hard to build up equity in their property, enabling them to benefit from this to borrow affordably and responsibly. Our research has found that the majority of homeowners are making big changes to their homes and Selina Advance is an affordable and flexible way for them to do this.
“As a homeowner you are rewarded with low rates compared to most other forms of unsecured personal credit (bank loans or credit cards) while having greater flexibility than a remortgage by only paying interest when you drawdown on your line of credit and no early repayment fees are applied.
“A HELOC is the best form of hybrid between a mortgage and a credit card; it’s as affordable as a mortgage and as flexible as a credit card, plus you can borrow large amounts of money over longer terms making the monthly payments affordable.”
New research from Selina Advance has also found that in the last year, over half (55%) of all British homeowners made improvements to their home, rising to almost two-thirds (61%) of people with net assets of £250,000+. More than a quarter of homeowners (26%) used credit to fund their home improvements (22% used unsecured credit such as a credit cards or loans and 9% remortgaged), rising to 34% among those with net assets of £250,000+ (28% used unsecured credit such as cards and loans and 13% remortgaged).2
The high flexibility of the new Selina Advance HELOC means homeowners can enjoy benefits such as access to their money when they need it and only pay interest on the funds they use, when they use them. In addition, homeowners can have unlimited drawdowns for five years and there are no early repayment charges for the whole term of the agreement.
How does Selina Advance HELOC work?
• Homeowners can apply for a Selina Advance HELOC via the website or on your phone
• Customers will get a personalised quote in two minutes and can then apply for a full application online in only 30 minutes. In addition, Selina Advance offers a personal adviser service
• Homeowners will then receive a multi-purpose personal line of credit. They can get access to this money when they need it and only pay interest for what they use
• For example, if you had a personal line of credit of £200,000 you could decide to build a home extension for £120,000 in year one. And if it ran over budget by £30,000 you could simply drawdown the additional funds only paying interest when you do this. Then in years 2-5 you can decide to spend the remaining sum or repay back with no early repayment charges (no ERCs apply even after the five year period)
• The HELOC is flexible and multipurpose so customers can draw down on their line of credit as needed via the Selina Advance app without having to re-apply
• The Selina Advance HELOC sits alongside a mortgage and does not affect your current mortgage
• Customers will be able to select fixed or variable rates. They will only pay for what they use from their line of credit so the repayments can vary. Fixed rates are for two or five years
• There is only a one-off £995 product fee that can be included in the monthly repayments.
• There are no property valuation, conveyancing or broker fees.
Fenwick continues: “We anticipate demand for these types of products to rocket in the UK over the next five years. Similar to other countries we expect them to be the first choice of credit for homeowners. There is a gap in the market for this product as it’s perfect for homeowners to benefit from the equity they have built up in their property. We want to champion homeowners and help them advance their lifestyle to take full advantage of their property. Many banks or lenders do not make the process easy for homeowners when making lending decisions. We do, that’s why we can offer low interest rates and real flexibility with this pioneering product.
“At Selina Advance we are proud to be the first to offer this product to UK consumers by using fintech innovation to answer customer needs and access the equity locked up in their homes in a simpler and affordable way.”
Selina Advance is using its leading fintech to ensure its application process puts the customers first. The application process takes 30 minutes and a personalised instant quote is ready in two minutes, with advice offered by phone with a personal adviser.
Selina Advance is approved by the FCA and, as a responsible lender, has a strict lending criteria; customers will need to be a homeowner with equity, a regular income and good credit score. Up to 85% combined loan to value (LTV) will be available in the coming months. It does not lend to customers with an adverse credit score and bad credit history.