What Is a Second Mortgage?

A second mortgage or second charge is a type of secured loan taken out against a home that already has a primary mortgage on it. Essentially, it is a secondary loan that uses the property as collateral. It operates completely separately from the first mortgage, with its own rate and mortgage terms. Homeowners typically seek second mortgages to access the equity they have built up in their home for purposes such as home improvements, debt consolidation, or major expenses.

There are 2 main types of second mortgages: home equity loans and home equity lines of credit (HELOCs). Home equity loans provide a lump sum of money with a fixed interest rate, whereas HELOCs offer a revolving line of credit with variable interest rates, allowing homeowners to borrow and repay as needed.

Second mortgages generally have higher interest rates than primary mortgages because they are riskier for lenders. If the homeowner defaults, the primary mortgage gets paid off first from the proceeds of a foreclosure sale, leaving less security for the second mortgage lender. Despite this risk, second mortgages can be beneficial for homeowners who need significant funds and have sufficient equity in their property.

How Do Lenders Work Out How Much You Can Borrow on a Second Charge?

Here’s a detailed look at what lenders consider and the factors that can influence how much you can borrow on a second charge.

Property Value

  • The property value is the current market value of your property. To establish this, the lender will likely require a professional valuation
  • The second charge will use the value of the property to calculate the equity you have in the property and your maximum borrowing

Outstanding Mortgage Balance

  • Your outstanding mortgage balance is the amount you still owe on your first mortgage. This balance is subtracted from your property’s value to determine the available equity

Equity in Your Property

  • Equity is the difference between the current market value of your property and the outstanding balance on your existing mortgage. It’s basically the value you’ve built up that doesn’t have a loan outstanding on it
  • Second charge lenders typically allow you to borrow a percentage of this equity. The CLTV (combined loan-to-value), which includes both the first and second charge mortgages, usually ranges from 65% - 85% of the property’s value


  • Your credit score and financial history will impact how much you can borrow and the interest rate you will be offered. The better your credit history, the lower the rates available to you and the more you can potentially borrow
  • Lenders will carry out a credit check on you, looking at things like your debt, how frequently you do or don’t pay bills on time, any missed payments, etc.

Income and Affordability

  • Your income and other financial commitments will be assessed to determine your ability to repay the second charge mortgage
  • What you can afford to repay on a monthly basis will impact how much the lender will let you borrow on a second charge and the terms of the mortgage

How Much Can I Borrow on a Second Charge?

Let’s go through a step-by-step example to show you the ways in which your circumstances can impact how much you can borrow with a second charge mortgage.


  1. Determine property value and existing mortgage:
    • Current property value = £300,000
    • Outstanding balance on the first mortgage = £150,000
  2. Calculate available equity:
    • Available equity = property value - Outstanding first mortgage
    • Available equity = £300,000 - £150,000 = £150,000
  3. Apply lender’s maximum CLTV ratio:
    • In this example, the lender allows a maximum CLTV ratio of 75%
    • Use the formula: maximum borrowing amount = CLTV x property value
    • Maximum borrowing amount = 75% of £300,000 = £225,000
  4. Determine potential second charge amount:
    • Potential second charge amount = maximum borrowing amount - outstanding first mortgage
    • Potential amount you can borrow on second charge = £225,000 - £150,000 = £75,000

In this example, you could potentially borrow up to £75,000 with a second charge mortgage, assuming the lender allows a CLTV ratio of 75%. The actual amount you can borrow will depend on:

  • The exact valuation of your property
  • The outstanding balance on your first mortgage
  • The lender’s specific criteria and maximum CLTV ratio
  • Your credit score and overall financial situation

Considerations When Taking Out a 2nd Charge

  • Interest rates: second charge mortgages typically have higher interest rates than first mortgages due to the increased risk for the lender
  • Fees and costs: be aware of additional costs such as valuation fees, arrangement fees and legal fees
  • Repayment ability: ensure you can afford the additional repayments on top of your existing mortgage commitments
  • Lender policies: different lenders have different policies and criteria, so it’s important to shop around and compare offers

How Much Can You Borrow on a Second Charge Mortgage? Find Out Now

The amount you can borrow with a second charge mortgage depends primarily on the equity in your property, the lender’s maximum CLTV ratio and your creditworthiness.

To find out how much you can borrow on a second charge mortgage, contact us on 0330 433 2927.