Second Charge Mortgages

What is a Second Charge Mortgage?

Your equity in the property is used as security for a second-charge mortgage, a homeowner loan. It’s taken out in addition to the initial mortgage you have on your home, but they don’t overlap in any way.

If you need a lump sum of money for a specific purpose, like renovations, it can be utilised as an alternative to remortgaging or getting a personal loan.

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How does getting a second-charge mortgage work?
In essence, you’ll have two independent mortgages on the same house. Even so, they might come from several lenders.

Depending on the Loan To Value ratio, a mortgage lender may be ready to give you a certain amount for a second mortgage (LTV). This won’t always be accurate. The majority of second charge lenders define the LTV criteria in a variety of methods, depending on many elements including credit score, affordability, first mortgage amount, obligations, and household expenses. Your individual situation and employment status will also be taken into account. Your age and the size of the loan you’re seeking for will both have an effect on the loan amount.

Each month, you’ll pay back two mortgages—one on your first mortgage and the other on your second.

It differs from remortgaging, which is the process of switching mortgages to obtain a lower rate or to access the equity in your home.

Things to consider before taking out a second-charge mortgage

Think over all your choices before taking out two mortgages.

Consider possible costs and fees as well as what would happen if you lost your work. How would you afford to make two mortgage payments each month?

We do offer comprehensive protection to safeguard against virtually all life events.

Affordability typically lower than a second mortgage and financial evaluations that apply to first mortgages also apply to second mortgages. As a borrower, you should think about organising your finances, looking for unused subscriptions, ensuring that payments are current, and reviewing your credit score in a manner similar to how you would if you were applying for your first mortgage.

Consult an impartial financial consultant if you are unsure if this is the best course of action for you.

Why get a second-charge mortgage?

Obtaining a second charge mortgage can be something you want to consider if:

  • Remortgaging is not an option because your present mortgage has high early repayment costs (ERC) for switching or you have a very low fixed rate.
  • Your financial situation has changed or your credit rating isn’t good, so if you refinanced, you wouldn’t be given a competitive interest rate. Your interest rate could be higher if you take out a second mortgage.
  • It might be used to combine debt from personal loans and credit cards. However, you are using your house as security in the same way as your main (1st) mortgage.