A second charge mortgage is a secured loan that uses the equity in a borrower’s property as security. Unlike a remortgage loan which repays the existing mortgage and replaces it with a larger loan including further borrowing, a second charge loan means that the current first charge mortgage will remain untouched and additional borrowing will be added as a second charge mortgage so in effect you will have two mortgages on your home.
When opting for a second mortgage on your home, there are several things to consider:
In order to qualify for a second charge mortgage, you will need to be a homeowner with enough equity in your property. Eligibility for a second charge mortgage is typically assessed in the same way as a traditional mortgage or remortgage loan i.e. your current income, credit history and general financial status will be considered by your chosen lender.
If you have an imperfect credit history or you are unable to provide proof of income, you may find it difficult qualifying with a major bank or lender but access to finance may still be available via specialist providers, using a brokerage such as UK Property Finance.
Maximum loan amounts are again calculated in the same way as a mortgage or remortgage loan using the equity you currently have in your property, your prove-able income & your general financial status.
Please contact UK Property Finance for a free, no obligation quotation or use our second charge calculator.
A second charge mortgage is generally considered as a more flexible option than remortgaging and can be useful when significant amounts of money are needed relatively quickly. Reasons for applying for a second mortgage may include the following:
One of the biggest issues with remortgaging is the way in which it is often necessary to pay an early repayment charge. If you were to pay off your mortgage in full at a date earlier than initially agreed with the lender then you may be liable for an early repayment fee.
Taking out a second mortgage to raise the funds could in many instances be a more cost-effective & flexible option, particularly if you were looking to borrow a smaller sum.
A whole of market brokerage such as UK Property Finance who offer both remortgages and 2nd charge loans will assess your needs and should recommend the best product for your requirements. Contact UK Property Finance for further details.
You do not necessarily have to live in the property you intend to secure a second charge mortgage against, provided you have enough equity in it. If you choose to sell the property at any time, you will need to repay the second mortgage in full or obtain agreement to transfer it to a new property.
Depending on your financial circumstances, there may be alternatives to second charge mortgages:
As with any type of loan or mortgage, second charge mortgages should only be taken if you are 100% confident in your capabilities to meet your repayment obligations for the term of the loan.
It is not advisable to apply for a second mortgage without careful consideration and qualified expert advice as the ultimate risk with all types of mortgages is repossession of your property if you fail to meet your repayment obligations.
Depending on the terms of your current mortgage, a second mortgage could prove far more cost-effective and flexible than remortgaging your home, particularly if there is a sizeable early repayment penalty for early repayment of your current mortgage.
A second mortgage is often quicker and easier to process if you have enough equity in your property. Poor credit applicants can also often access competitive second mortgages especially through whole of market specialist brokers such as UK Property Finance.
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