Lifetime Mortgage that allows for additional second charge

Answered on 12 June 2016 by Nick Morrey

As an existing equity release lifetime morgtagee currently with loan to value of 17.3% with unused cash facility of £65K which would take total L/V to 30.7% including ERC of £12K, I am seeking to raise a further £50K on an interest only mortgage for a period of up to 7 years. I am currently 68 years old, house value £485k jan 2012 by RICS's valuation. Which Equity Release companies if any will allow a second charge on property in these circustances?

Equity release companies that allow a second charge

I do not know of any equity release companies that will consent to a second charge being registered on your property.  Usually the reason for this is the equity between how much you have borrowed and the property value forms a safety net and the means to repay the existing debt in the future. With a lifetime mortgage rolled up interest can very quickly build up as these figures from the Equity Release Council show:

Based on a loan of £45,000 with interest charged at 5% the amount you would have to repay after 5 years is £57,433. 10 years is £73,301. 20 years is £119,399 and 25 years £152,387.

As you are aged 68 it is not unreasonable to expect you to live for at least another 20 years and as you already have a facility of £148,905 you can see why none of the Equity Release lenders would allow a second charge or lend you more at this stage.

Are there any other options?

Depending on your earned / retirement income it may be possible to arrange an ordinary mortgage to repay your existing debt and early repayment charges.  However, there are very few lenders who will consider this and you need to consider whether it is worth paying over £12,000 in charges to borrow £50,000?

I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers.  Please call 0344 346 3672 to speak to an adviser about this further, and feel free to read our borrowing into retirement guide.

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.


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