Second charge mortgages
A second charge mortgage (or second mortgage) is an option if you'd like to borrow additional money or release equity without remortgaging your home. A second charge mortgage lets you borrow money from another source other than your lender, which you could use for home improvements or to pay off other debts, for example.
If you're a homeowner, a second charge mortgage can provide you with additional funds without remortgaging.
With a second charge mortgage, the second charge lender gives you a loan secured against your home. As your existing mortgage lender already has a charge on your property (“first charge”), the new lender takes second priority. So if the loan needed to be called in and your property sold, the first lender would have the first call on equity in the property.
Because we play by the book we want to tell you that...
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed.
If you’re looking to release money from your home, there are several reasons why it might be beneficial to take out a second mortgage, including:
- Your credit rating has worsened since your original mortgage, so remortgaging could mean paying a higher interest rate.
- Interest rates have increased, or you’re on a discounted interest rate, so switching to a new product for your current house loan plus additional borrowing wouldn’t be cost-effective.
- Your current mortgage has a high early repayment charge.
A second charge mortgage can also be a good option if you’re struggling to get unsecured finance such as a personal loan, perhaps because you’re self-employed or your credit rating has gone down.
The maximum second mortgage available to you will depend on the amount of equity in your home. Also, a second charge mortgage’s interest rate can be much higher than a first mortgage. So, before you take out a second mortgage, it’s worth having a qualified adviser check your situation.