What is a second charge mortgage?

Second charge mortgages are a type of secured loan which allows homeowners to raise extra money without remortgaging or taking out an unsecured personal loan. John Charcol can help you find flexible mortgage providers who are willing to lend you money that is secured against the value of your home.

With a second charge mortgage your loan is secured against the value of the equity in your home much like your first mortgage. There are several reasons where a second charge mortgage might be worth considering, including: 

  • If you don’t want to extend the term on your current mortgage - or forgo the existing low rate on your current mortgage deal
  • If your credit rating has gone down since taking out your first mortgage - remortgaging could mean you end up paying more interest on your entire mortgage, rather than just on the extra amount you want to borrow.
  • If your mortgage has a high early repayment charge - it may be cheaper for you to take out a second charge mortgage rather than to remortgage.
  • If you’re struggling to get some form of unsecured borrowing - such as a personal loan, perhaps because you’re self-employed.
  • If your current lender is unwilling to provide the funds that you require – perhaps for example as your using it to invest in a business venture
  • If you need to move fast and have funds available quickly - second charge mortgages are often a speedier option than a traditional remortgage 


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Can I get a second charge mortgage?

Any homeowner with at least 15% equity in their property can apply for a second charge mortgage. Second charge lenders may offer more flexible lending criteria than a first charge mortgage, but broadly applications are assessed in the same way as a traditional mortgage; taking into consideration  the property’s value and condition as well as your income and credit rating.

How much can I borrow?

How much you can borrow will depend on the equity in your property - the equity is the percentage of the home owned outright by you. For example, if you bought a house for £500,000 and you have £150,000 left to pay on the mortgage, then you have £350,000 equity. The equity you own in your home will increase with the property’s value.

Second charge mortgages usually let you borrow money starting at £10,000. The higher the equity in your property, the more money you are likely to be able to borrow. Although this would be subject to your income and credit rating.

Second charge mortgage advice

John Charcol can advise you on everything you need to know before considering a second charge mortgage. Before applying, it is worth considering the following information:

  • As a second charge mortgage works very much like your first mortgage, your home is at risk from repossession if you don't keep up the repayments
  • If you sell your home, the first charge mortgage gets cleared in full before any money goes towards paying off the second charge, although the second charge lender would be likely to pursue you for any shortfall
  • If you need to borrow less than £10,000 it may be more cost-effective to apply for an unsecured product such as a personal loan

For second charge mortgage advice, get in touch with John Charcol's team of experts by calling us on 0344 346 3672 or requesting a callback from a broker. We specialise in finding the best mortgage rates for all kinds of buyers.

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