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A Second Charge Mortgage is an additional loan on top of your existing mortgage. These are sometimes known as ‘Secured Loans’.
Unlike re-mortgaging – where you change your basic mortgage to another one – a Second Charge Mortgage is paid alongside your current mortgage. Where your current mortgage has the first legal ‘charge’ attached to your property, when you take out a second mortgage, a second legal ‘charge’ is added, hence the name.
You need to be a homeowner already to get a Second Charge Mortgage, though you don’t need to live in the property. It is usually used to free up the equity in your home.
Second Charge Mortgages are often used to raise extra money for a specific reason. These could include major repairs, extensions or personal costs.
Second Charge Mortgages are an alternative way of raising this money to either extending your existing mortgage (a ‘Further Advance’) or remortgaging to a different, larger basic mortgage.
As mortgage applications have become tougher in recent years, Further Advances and remortgaging can be difficult for those who have become self-employed or have variable income through a small business.
Second Charge Mortgages are often used instead of remortgaging if your credit rating has dropped meaning you could face higher interest rates on your remortgaged loan. They are also used when the early payment fee is very high on your current mortgage, making remortgaging costly.
Like basic mortgages, your property is at risk if you don’t keep up the payments.
There are a number of reasons why a Second Charge Mortgage might be more suitable than remortgaging...