A Guide to Second Charge Mortgages

2nd charge mortgages explained

A second charge mortgage is a type of secured loan. They are borrowed with your home security as collateral and they are most popularly used instead of remortgaging a property. It’s secured alongside any other mortgage that you have; which means that you would have two mortgages attached to your home at one time. Your main mortgage is your priority in terms of repayment, which means that before you apply for a new second charge mortgage, you need to ensure that you can keep up with the repayments on it – so that you don’t lose your home.

When is a second charge mortgage a good idea?

You can only get this type of loan if you are already a homeowner, but you don’t have to be living in the property to get the loan. So, if you are renting a property out to tenants right now, you could still get a second charge mortgage on the buy to let property. It’s important to know when this type of loan is a good idea, especially as it is secured to your house.

An old lifetime tracker or interest only mortgage. Choosing a second charge could help you to keep the low rates that you don’t want to lose on your house with your existing mortgage. Moving to a new lender could disrupt the low rates that you’re paying, so getting a second charge mortgage means borrowing what you need without disrupting those rates. The drawback? Your overall debt is bigger because you’ve borrowed further. Always be sure that this is what you want to do before you secure a loan against your house.

Locked into a fixed rate. There is nothing wrong with a steady, fixed rate mortgage. However, if you want to borrow further, you don’t want to tip the scales and raise your repayments. A second charge mortgage can be much cheaper than remortgaging the entire house. You can also avoid stopping your fixed rate.

You can’t get a standard loan. If you wanted to fund a business or invest in one, second charge lenders can be more flexible in the way in which they deal with your mortgage.

What if i want to move house?

While you have a second charge mortgage on your home, you need to look at paying this off entirely before you make any kind of move. You can also choose to transfer it to a new mortgage with another provider if you don’t stick with the same company.

What should I consider before I go for it?

As with any mortgage, you need the appropriate advice. Sitting with a broker and going over your options is essential, as they can help you to find the best option for your financial situation. They can also help you to to assess whether it would be the best idea for your financial future. Choosing to avoid some professional advice is up to you, but it’s a risk that you will be taking on your loan choice. You can easily choose the wrong loan, so take the time to get the right advice from the right people. Its worth noting that all brokers in this market charge broker fees, and there are only a small handful of lenders that all you go apply direct.

Shop around for the best APR and always, always read the smallprint. Your home depends on you being vigilant with your choices here, and your second charge mortgage could be the best thing that you do for your circumstances. It works in the very same way as your original mortgage, which means that your house WILL be at risk of repossession if you don’t make sure that you repay it on time. If your mortgage has a higher repayment charge, you could find it much cheaper to take out a second charge mortgage than remortgaging.

Ultimately, the decision is in your hands and information is everything for the future of your finances and your mortgage.