Second Charge Mortgages

A second charge mortgage is a loan secured on your property that sits alongside your main mortgage. Your original lender still has the first claim on the property, while the new lender takes second position. This means that if the property were sold, the first mortgage would be cleared before the second one is repaid. Because of the added risk for the lender, interest rates on second charge mortgages are usually higher than those on first mortgages.

The amount you can borrow depends largely on the equity available in your home, which is the difference between its current value and the outstanding balance on your existing mortgage. Lenders will also assess your income, credit history and general affordability to ensure that you can manage the repayments on both loans.

There are many reasons why people choose a second charge mortgage. It allows you to keep your current mortgage deal, which may be at a lower rate, while avoiding early repayment charges that could apply if you remortgage. It can provide access to funds for property renovations, consolidating higher-interest debts into one manageable payment, or raising money for business or family purposes.

However, it is important to recognise the potential drawbacks. Rates tend to be higher than for standard mortgages and you will have two separate monthly repayments to manage. As both loans are secured against your property, failing to keep up with payments could put your home at risk. In addition, if you decide to sell your property, both mortgages would normally need to be settled.

Applying for a second charge mortgage involves several stages. You will usually need permission from your first mortgage lender, a professional valuation of your property and legal conveyancing work to complete the agreement. Many second charge products are offered by specialist lenders, so it can be highly beneficial to seek advice from a broker who understands this area of the market and can help you find the right option.