Can You Get a Second Charge Mortgage on Your Home?
Whether you can get a second charge on your home will depend on your income, how much equity you have in your property and whether your existing lender will allow it.
What Is a Second Charge?
A second charge – otherwise known as a "second mortgage" or “second charge mortgage” is a mortgage that’s secured against a property which already has a mortgage on it.
This second mortgage is entirely separate from your original or "first” mortgage. It’s a completely different product with a new lender. This means that the rate, period of time you have that rate and the overall mortgage term may be different.
You need your existing lender’s permission in order to secure a second charge on your property.
The second mortgage rates available to you will likely be higher than the rate for your first mortgage, as second charge lenders are often taking on more risk; if were you unable to keep up your mortgage payments and your property was repossessed, the first charge lender would be paid before the second charge lender. This means that, if there wasn’t enough equity in the property to pay back both lenders, the second mortgage lender could lose money.
Who Could Benefit from a Second Charge?
You might find a second charge suitable if you:
- Want to avoid remortgaging because you’re still on your introductory deal and your mortgage has ERCs (early repayment charges)
- Have a great deal on your current mortgage that you don’t want to lose by remortgaging
- Don’t want to extend the term of your current mortgage
- Aren’t able to get a further advance from your existing lender
- Have found that your credit rating has gone down since taking out your first mortgage
- Are struggling to obtain some form of unsecured borrowing
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Do You Need a Specialist Second Charge Mortgage Broker?
You don’t need to use a mortgage broker to get a second charge on your property, however a lot of second charge mortgage lenders don't offer their products directly to the public. This makes it more likely you'll miss out on securing the best deal for your situation if you choose to source a second charge yourself.
Using an independent mortgage broker like John Charcol gives you access to more second charge mortgage providers, and this – coupled with our expertise and industry knowledge - makes it far more likely you’ll find a deal that really suits your needs.
How Can John Charcol Help with Second Charge?
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Second Charge Mortgage Process
1. First Call
When you contact us, we’ll arrange an appointment between you and one of our advisers – this can be over the phone or face to face. Your adviser will ask you some questions and, once they have all the right information, they’ll go away and find you the best second charge option for your current and future needs. They’ll then organise a follow up appointment to tell you about their recommendation.
2. Decision in Principle
After your adviser has presented you with their recommendation and you’re happy to proceed, they’ll work on securing your DIP (Decision in Principle). Your DIP is a promise from the lender that they’ll loan you the money on the condition that the information you’ve provided is correct and subject to a valuation on the property.
3. Pre-Application and Submission
Once the lender secures your DIP, we’ll start to prepare your mortgage application. We’ll send you a pack that explains all the different documents the lender needs. You’ll be assigned a client relationship manager who’ll go through your documents and get everything ready for submission. Your adviser will then submit your full mortgage application.
4. Lender Underwriting and Valuation
The lender carries out a process called “underwriting” where they check all the information and documents you’ve provided in your application. They’ll also instruct a valuation for their purposes on the property to make sure there are no significant problems with it. Sometimes a lender will only instruct a desktop valuation for a second charge – rather than a physical valuation – as your property would have likely had a valuation and internal inspection when you took out your first mortgage.
5. Mortgage Offer
Following a successful underwriting process and valuation, the lender will accept your application and send you a mortgage offer. They’ll also send a copy to us.
Finally, after you’ve signed all the paperwork, your lender will arrange a date with you to drawdown the new money. This is called completion.
Second Charge FAQs
What Is a Second Charge on a Mortgage?
You don’t take out a second charge on an existing mortgage. A second charge is a second mortgage you take out on a property that already has a mortgage on it. Second charges are a way to release equity from your property and access money without remortgaging away from your current lender.
How Long Does a Second Mortgage Take?
Getting a second mortgage typically takes 4 – 6 weeks, assuming there are no issues with your application.
Are Second Mortgage Rates More Expensive?
Second charges are usually a little more expensive than first charges because they’re a riskier form of lending for providers. If you were unable to keep up both of your mortgage payments and your property had to be repossessed, the lender of your first mortgage would come before the second lender when it came to receiving money from the sale of the property. And, if your property isn’t worth the full amount owed on both mortgages plus interest, the second lender could miss out.
Does a Second Mortgage Hurt Your Credit?
Getting a second mortgage on your property won’t hurt your credit score, as long as you keep up your monthly payments on both your original mortgage and your second mortgage.
Can a Mortgage Company Refuse a Second Charge?
Not all main mortgage lenders will permit a second charge on your property because of the additional risk they incur.
Will Second Charge Lenders Ask Me for a Deposit?
Like with a remortgage, you don’t need a cash deposit for a second charge. The lender simply lets you release equity that you already own in your property for the loan.