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Second Charge Mortgages

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What is a second charge mortgage?

A second charge mortgage, also known as a secured loan or a second mortgage, is a type of loan that allows homeowners to borrow money against the equity in their property.

Usually, the more equity you have in your home, the more you’ll be able to release.

The interest rate of a second charge mortgage will be slightly higher than a regular, first charge, mortgage due to the higher risk involved by the second charge lender.

The first charge of the property will be held by the primary mortgage company. In the event of repossession, the first charge mortgage will be repaid first from the proceeds followed by any second charge or subsequent secured loans.

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Second charge mortgage for different purposes

There are lots of reasons and individual situations where a second charge mortgage will be recommended by our advisors, these include:

Home Improvements – A second charge mortgage can be used to fund home improvements such as a new kitchen, bathroom, or extensions etc. These enhancements can also lead to an increase in property value over time.

Debt Consolidation – Both unsecured debts such as credit cards or loans, or other secured loans can be consolidated using a second charge mortgage. Great advice is required here as you will need to be made aware and run through any risks involved with your mortgage advisor.

Releasing Capital – There are many reasons why clients would consider a second charge mortgage to raise capital. Such as helping family members, a large purchase or holiday, home repairs, tax bills etc.

Investment/Business Opportunities – Business owners and landlords may consider a second charge mortgage if they need money quickly for another business interest such as to buy another property or perform a refurbishment project.

You should think carefully before securing other debts against your home. By adding your unsecured debts to your mortgage, which is secured on your home, you are potentially putting your home at risk if you cannot make the required repayments.

Although the total monthly cost of servicing your debt may have reduced, the total cost of repayment may still have risen as the term of your mortgage is longer than it may have taken to repay the debts originally.

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Second Charge Mortgage FAQs

What are the different types of second charge mortgage?

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As with regular mortgages, there are lots of different types available to cater for individual client circumstances. As part of receiving great second charge mortgage advice, your mortgage advisor will recommend the best way forward based on your situation.

Here’s a summary of the types of second charge mortgages that are available:

Repayment – At the end of your agreed repayment term, the loan will be repaid. This is the most common type of second charge mortgage.

Interest Only – You’ll just repay the interest payments; the capital will remain the same throughout the term. You’ll need to prove to the lender that you have a repayment/exit plan in place for this type of loan.

Variable/Fixed Rates – As with regular mortgages, there are various interest rate options such as fixed terms or variable rates. Your second charge mortgage advisor will recommend the best way forward based on your personal situation.

Early Repayment Charges – A secured loan is a medium to long term commitment, if you repay the loan early there will usually be early redemption charges payable, just like with a regular mortgage. If you are looking for short-term borrowing for 24/36 months or below, there may be other products more suitable that we’d recommend.

Why use a mortgage broker when looking at second charge mortgages?

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As a mortgage broker, we’ll make sure all clients will receive a free, no-obligation consultation where we’ll answer all your questions and explain a route forward.

You can book this online via our ‘speak to an advisor’ button or telephone.

Each type of second charge mortgage has its own terms, eligibility criteria, and purposes.

As part of our second charge mortgage advice process, we’ll recommend the best way forward for you and let you know the fees and costs involved with your second charge mortgage.

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Availability Monday to Sunday!

Book your free mortgage appointment around your personal and work commitments.

30-45 minute Free mortgage review.

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Converse with your own dedicated case manager.

Your case manager will be by your side through the whole process.

We're here for you, every step of the way!

Any questions regarding your mortgage or the process that you have along the way, we will be more than happy to answer them.

Your mortgage isn't the only priority, insurance is important too.

We like to make sure every customer who get in touch are covered with the right inurance policy tailored to their circumstances, to make sure they are protecting themselves and the people they love.

Explore various mortgage products.

In order to try and find the best mortgage deal for you, we will search through various specialist lenders.

We have 20+ years of experience dealing with mortgage situations.

We have insider knowledge of lending criteria and debt consolidation mortgage products.

Your advisor will be with your every step of the way to try and help you with your mortgage, even with bad credit.

It's not just about the mortgage, we want you to receive the best mortgage advice and customer service possible to let you take out a second charge mortgage.

Second Charge Mortgage Considerations

Security

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If you’re looking to consolidate your unsecured debts such as credit cards and/or personal loans, you’ll need to fully understand and consider the risks of securing these against your home. Our mortgage advisors will run through all of these with you.

Higher Interest Rates

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Due to the higher risks involved for the lender, second charge mortgages tend to have slightly higher interest rates compared to traditional a first charge mortgage. However, second charge rates are usually much lower than any unsecured personal loan or credit card etc will offer. So generally, it’s a cheap way to raise money.

Affordability Assessment

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Applying for a second charge mortgage is a very similar process to applying for a first charge mortgage. You’ll need to pass affordability assessments and prove you can afford the repayments. Documents such as bank statements and proof of income will be requested.

Loan Amount

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We may need to prove to the second charge mortgage lender the purpose of the loan. For example, if your second charge mortgage is for home improvements, we might need to provide quotes and timescales etc.

Credit Score

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Similar with first charge, regular mortgages, there may be options available for second charge lending with a low credit score. Your mortgage advisor will be able to review your credit report and advise of your options.

Associated Costs

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In addition to the interest rate, borrowers should be aware of other costs associated with a second charge mortgage, such as arrangement fees, valuation fees, legal fees, and potentially early repayment charges. All the costs will be explained clearly as part of the second charge advice process.

Property Value

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Similar to a first charge mortgage, as part of the process, you’ll be required to pay for a property valuation. Often, this can be added on to the loan amount if required. This figure will be in the region of £100 to £300 depending on the second charge mortgage lender.

Time Scales

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Second charge mortgages are much faster to complete than with a regular mortgage. This is due to a quicker legal process and there’s no-chain involved. However, if money is required in weeks an alternative short-term product like bridging finance might work better. Your mortgage advisor will help you with this and recommend the best product to meet your situation.

UK Moneyman Limited is Registered in England, No. 6789312
Registered Address: 10 Consort Court, Hull, HU9 1PU.

Authorised and Regulated by the Financial Conduct Authority.

We are entered on the Financial Services Register No. 627742 at www.register.fca.org.uk

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