Second Charge Mortgages
Here you’ll find information on second charge mortgages: what they are, how they work, when they’re a good idea, what second charge lenders are available, their criteria and more.
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What Is a Second Charge Mortgage?
A second charge mortgage, also referred to as a “secured loan” or “second mortgage” allows a person to borrow money on a property which already has an existing mortgage on it. This existing mortgage is called a first charge. The second mortgage is separate from the first mortgage because it’s a completely different product with a new mortgage lender. The rate, period of time and overall mortgage term may be different.
You'll likely need your existing lender’s permission in order to secure a second charge on your property.
The second charge mortgage rates available to you are likely to be higher than on your first mortgage, as the second lender will be taking on more risk. For example, if you were 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.
Second Charge Not What You're Looking for?
If it's a first charge mortgage you're after, see our best buys to compare mortgage deals.
Learn More About Second Charge Mortgages
How Does a Second Charge Mortgage Work?
Learn the definition of a second charge mortgage, how second charges work, what LTVs are available and more.
Pros and Cons of a Second Charge Mortgage
What are the benefits and downsides of a second mortgage? Is it worth it? Here we go through the pros and cons and who should consider a second charge.
How to Put a Second Charge on Property
Want to know how to put a second charge on property? Here we go through the second mortgage process as well as how long it takes to arrange a second charge.
Difference Between First and Second Charge
What is the difference between a first charge and second charge mortgage? Here we explain each option and when to choose a first charge vs second charge.
Why Would You Get a Second Charge Mortgage Loan?
Expensive Remortgaging Rates
If you have a poor credit rating, the remortgage deals available to you could come with higher interest rates and you’d miss out on more competitive deals. Taking out a second charge can potentially be cheaper as it will allow you to keep your first rate in place and pay interest at a higher rate only on the additional borrowing. If you already have an idea of the remortgage rates available to you, try our mortgage comparison calculator to see whether remortgaging is a viable option.
Early Repayment Charge
Some mortgages have high ERCs (early repayment charges), so it could be cheaper to take out a second charge mortgage instead of remortgaging.
Further Advance Not an Option
Your first charge lender may not allow you to borrow more on a further advance. A second charge presents an opportunity for additional borrowing that can be used for things like tax bills.
Is a Second Charge Loan a Good Idea?
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
- Want funds for home improvements
- Want to consolidate some unsecured debt and improve your credit score
- Have emergency expenses such as unexpected medical bills or urgent repairs to the home
- Want borrowing flexibility
- Want to fund a large purchase such as a new car or wedding, or want to use the cash to finance your child’s education
- Want to invest in your business
Borrowing More for Home Improvements?
Want to borrow more on your property for a renovation or extension? Find out how much value an extension could add to your home with our house extension cost calculator.
Can I Get a Second Charge Mortgage?
Whether you can get a second charge on your house will depend on your income, how much equity you have in your property, whether your existing lender will allow it and lender criteria.
You may also need to discuss with your broker whether your property requires a non-standard construction mortgage.
Could a Second Charge Be Right for You?
Can I Get a Second Mortgage on My House?
Can you get a second mortgage on the same house? Yes! Find out how here. We explain how getting a second mortgage on your house works, lender criteria and more.
How Much Can I Borrow on a 2nd Charge Mortgage?
How much can you borrow on a second charge mortgage? Here we explain what lenders consider, how factors impact your borrowing & run you through a clear example.
Compare Second Charge Mortgage Rates
What are second charge mortgage rates and how do they work? Here we explain how to get the best second charge deal, what can impact the products available to you and more.
How to Remove a Second Charge on a Property
Learn how to remove a second charge on a property here. We go through how to pay off a second charge, the benefits, the considerations and more.
What Are Some Second Charge Mortgage Lenders UK?
Second charge mortgage lenders vary from large banks and building societies to specialized financial institutions that focus exclusively on secured lending. Each lender has there own individual criteria which means that the one who can offer you the best deal will depend on their criteria and how it aligns with your situation.
Some examples of second charge mortgage lenders we work with include:
- Tandem
- Together
- Pepper Money
- West One
- MT Finance
- Octopus Real Estate
- Equifinance
- Selina
- Precise Mortgages
- Octane Capital
- And more
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.
Second Charge Mortgage Provider Criteria
1. Equity in Property
Lenders will assess the amount of equity you have in your home as this is what will be used as security for the loan. This calculated by looking at the property value minus your outstanding first charge mortgage balance.
2. Credit History
While second charge lenders may be more flexible than first charge lenders, your credit history still plays a crucial role. However, options are available for individuals with less-than-perfect credit scores, but these may come with higher rates or less flexible terms.
3. Income and Debt-to-Income Ratio
Your income and debt-to-income ratio help lenders determine your ability to manage additional debt. You'll need to provide proof of income and existing debt obligations.
4. Loan-to-Value (LTV) Ratio
This is the ratio of your loan relative to the value of your property. Second charge lenders look at a combined LTV (i.e. the total maximum borrowing of both the first and second charge combined). Different second charge lenders have varying maximum LTV ratios, typically up to 75% or 85%.
5. Purpose of the Loan
Lenders will consider the purpose of the loan. Second charge mortgages are generally more flexible regarding the use of borrowed funds and will often accept purposes ranging from home improvements to debt consolidation.
Do You Need a Second Charge Mortgage Broker?
While it is not strictly necessary to use a mortgage broker for a second charge mortgage, there are several benefits to doing so.
Advantages of Using a Second Charge Mortgage Broker
Expertise and guidance: mortgage brokers are knowledgeable about the different types of loans available and can give you bespoke second charge mortgage advice. They can guide you through the process, explain the terms and conditions, and help you understand the potential impacts on your finances
Access to better deals: brokers often have access to a wider range of products than the average consumer. They can shop around on your behalf to find competitive rates and favourable terms that might not be readily available through direct searches
Convenience: securing a second charge mortgage involves a lot of paperwork and negotiation with lenders. A broker can handle these aspects for you, making the process more streamlined and less stressful
Problem solving: if there are any issues with your credit history or the application process, a broker can often find creative solutions or suggest alternative funding options that you might not have considered
Regulatory compliance: brokers understand the legal and regulatory requirements of a second charge and can ensure that the loan process complies with all relevant laws, which can protect you from potential pitfalls
Need a Specialist Second Charge Loan?
Second Charge Bridging Loan UK
Second charge bridging loans can be a great short term finance solution if you need access to funds quickly and are struggling to sell your current home.
Commercial Second Charge
Want a commercial second charge? Otherwise known as a second charge business loan? Find out what they are, how to get one and how they can help your business.
BTL Second Charge Loans
Want a second charge mortgage for buy-to-let property? Learn how a second charge buy-to-let works, when you’d use one, what criteria lenders consider and more.
Second Charge Mortgage Bad Credit
A second charge mortgage can be suitable if you have a bad credit history. Learn everything you need to know about second charge mortgages and bad credit here.
Alternatives to Second Mortgage
If you need access to additional funds, there are several alternatives to taking out a second mortgage on your property, such as the following.
- Further advance - this is where you stay with your current lender but are able to release equity to raise additional funds. These are based on current market conditions and won’t affect your existing mortgage. They’re also typically cheaper than second charges
- Remortgaging - remortgaging can allow you to release equity. You do this by borrowing more when you remortgage than the amount outstanding on your existing loan
- Personal loan - if you don’t need a particularly large loan, for example you want to borrow less than £10,000, an unsecured personal loan may be preferable as it can give you access to funds without putting your home up as collateral
- Homeowner loan - this is similar to a second mortgage but lenders may have different names for them
- Credit cards or overdrafts - if you need access to a small amount of money for a short period a credit card or overdraft facility is an option
- Borrowing from family - a loan from a relative or friend might be an option, however, it’s important to formalise the arrangement with clear terms to avoid any potential misunderstandings and ensure you can afford the repayment plan
- Savings or investments - you can consider using any savings or investments you have rather than taking on additional debt
Second Charge FAQs
What Is a Second Charge on a 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.
Is a Second Charge Mortgage the Same as a Remortgage?
A second charge mortgage is not the same as a remortgage.
A second charge mortgage is a type of secured loan that’s taken out against the available equity in your home after the money you owe on your mortgage is deducted from the value of the property. Your normal mortgage against your home is the first charge against your home, which means if you default the lender has first claim on the proceeds from selling the property. The lender of the second charge secured loan must wait for the first mortgage lender to recover any debt before their debt is covered. A second charge operates separately from the second charge; they can be on different rates, have different terms and be with different lenders.
A remortgage is where you take out a new mortgage with a new lender on your property, replacing the existing mortgage in the process. Your remortgage arrangement pays off the existing mortgage loan when it’s actioned; it’s basically a first charge replacing another first charge. You typically remortgage when you come to the end of your current mortgage deal to avoid going onto your lender’s more expensive SVR (standard variable rate). You can remortgage for the same amount you had outstanding on your existing mortgage or you can remortgage for a greater amount and release equity from the property that can be used to fund large purchases or pay for home improvements.
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 first charge mortgage lenders will permit a second charge on your property because of the additional risk they incur. If your lender does not agree for you to take a second charge out on your property, you may be able to consider an equitable charge. An equitable charge is where a lender is able to use your property as security but they don't require the first charge lender's permission. Talk to your broker to see if this is an alternative option for you.
What Happens if I Move House?
You’ll need to clear the second charge mortgage when you move and sell your house which means it’s important to check whether you’ll be liable for any ERCs (early repayment charges).
Remortgaging Guide
Remortgaging means to switch to a new deal with a different lender but stay in the same property. Learn about remortgage costs, valuations and see our advice.
Funding Home Improvements
There are a few ways to finance work on a house: get a home improvement loan, remortgage for home improvements, ask your lender for a further advance & more
Second Property Mortgages
Are you looking to buy a second home and need advice on a second property mortgage? Perhaps you’re planning to buy a holiday home? Read our guide to find out more.
Limited Company Buy-to-Let Mortgage
Considering buying a buy-to-let property through a limited company? Read about tax efficiencies, setting up a buy-to-let LTD company, advantages & disadvantages
Mortgage Glossary
On this page you’ll find our detailed mortgage terminology glossary. There’s a lot of jargon out there but we’re here to make it easy.