Second Charge Mortgages

Second Charge Mortgages

Demand for Second Charge Mortgages is on the rise as Borrowers look to unlock equity from their Homes. Second Charge Mortgages are available on both Residential & Buy to Let Properties. They tend to be offered by Specialist Lenders as oppose to Mainstream, High Street Lenders. The benefit of this, is Second Charge Lenders tend to be more flexible with their Criteria than mainstream lenders. Meaning you have a greater chance of being accept for the Mortgage.

What is a second charge mortgage?

When an existing homeowner takes out a Second Mortgage on top of their current Mortgage, with a different Lender. If they were to take it out with their Current Lender, this would simply be known as a further Advance.

 

Like your current Residential first charge Mortgage, it is secured against your property. This is opposed to an Unsecured Loan, which is not.

As you did with your original Mortgage, you will have to go through the same Underwriting process.

typical loan amounts

Second Charge Mortgages tend to be for lower amounts than ordinary Mortgages. Loans start as low as £1,000 and as high as £250,000 as standard. With higher loans permitted with some Lenders, and others on referral.

what can i use the second charge mortgage for?

Most Lenders will allow you to raise funds on a Second Charge basis for any legal purpose. The most common reasons are for Home Improvements and Debt Consolidation. But can be used to pay for a Tax Bill or even if you just wanted to release some equity to purchase a Car or go on a well-deserved Holiday.

Lender considerations

Second Charges are classified as higher risk than ordinary first charge Mortgages. This is because as the name suggests, the charge the lender has over your property is second to that of the first charge lender. 

    If either Lender ever needed to repossess your property, the first charge lender will always need to be repaid first. Followed by the Second Lender. Therefore, there’s a higher risk that the Second Charge Lender, may not be repaid.

    Why choose a second charge mortgage?

    You should always consult a Mortgage Advisor before taking out a Second Charge Mortgage. There could be cheaper options available and a Mortgage Advisor will explore all these options. Alternatives, include a Further Advance with your current Lender, a Remortgage and an Unsecured Loan.

    There are a variety of reasons you may take out a Second Charge Mortgage over the above alternative options, including:

      • You are unable to get a Further Advance with your existing lender – for example if your circumstances have changed since taking out the Mortgage with the original Lender
      • A Further Advance or an Unsecured Loan would be more expensive
      • Your existing Mortgage is on a cheaper Interest rate than what you would be on if you Remortgaged to a new Lender
      • There are high Early Repayment Charges on your current Mortgage meaning it would be more expensive to Remortgage.

      key things to consider

       

      • Rates and Fees tend to be more expensive than with ordinary First Charge Mortgages

      • Consolidating low levels of unsecured debt on your property and repaying this over a longer term, could end up being more expensive.

      • You are Securing further funds against your property. If you are already struggling to repay your bills and you are increasing your overall Monthly outgoings further. You’re putting yourself at a real risk of losing your home, if you do not keep up with repayments.  

        I have been declined by my current Mortgage Lender, does that mean I won’t be accepted by a Second Charge Lender?

        As mentioned above, Specialist Mortgage Lenders tend to be the ones that Offer Second Charge Mortgages. The benefit of this is, Lenders tend to be more flexible with what Criteria they accept. For example, if you have Adverse Credit and/or 1 years-worth of Self-Employed Accounts.

          what can i borrow up to?

          Most lenders will permit you to borrow up to the same level as ordinary first charge High Street Lenders. For example, up to 95% loan to value on your Residential Property. (loan to value example; £100,000 property value and £80,000 Mortgage plus £10,000 Second Charge Loan = 90% Loan to Value).

            Some specialist Lenders will even allow you to borrow up to 125% loan to value. This should always be carefully considered, not least because these products tend to be very expensive.

            Want more information?

            Not all Mortgage Advisors will have the specialist knowledge or even deal with Second Charge Mortgages. They require there very own Specialist. Second Charge Lenders require a hands on Advisor which understands the entire process.

            Speak to one of our qualified, regulated and highly rated Mortgage Advisors. Simply complete our short Mortgage Enquiry form and we will get one Mortgage Advisor, which specialises in your case, to give you a call. They can answer any other questions you have, provide you with a free non-obligatory quote and/or talk you through the process in greater detail.
            If you’re self-employed or have had credit problems in the past, don’t worry, we can help. As a specialist in these areas, we have access to all Specialist Mortgage Lenders.

            Our Mortgage Brokers

            We work with a variety of Mortgage Brokers which each specialise in different Mortgage Advice areas. When you get in touch, simply select the reason why you’re getting in touch i.e. First time buyerBad Credit, Remortgage etc. And we will match you to the Mortgage Broker which Specialises in your circumstances.

              All of the Mortgage Brokers we work with are whole of market, fully CeMap qualified, regulated by the FCA, have fair fee policies in place and have consistently great reviews.

              Get in touch for a free non-obligatory conversation with one of our Specialist Mortgage Advisors for further information on how they can help you.