What Is A Second Charge Mortgage?

A second charge mortgage allows you to use the equity you have in your home as security against another loan. It means you will have two mortgages on your home.

A second charge mortgage – sometimes called a secured loan – can be a good option if you’d like to borrow money while leaving your current mortgage in place. The new loan is secured on your property and is available for many different purposes.

Why would someone take a Second Charge over a mortgage?

There are several reasons why this would be more appropriate than a mortgage. You can take out a second charge mortgage for various purposes. Some of the most common include;

• Home improvements
• Buy-to-let property purchase
• Children’s tuition fees
• Lease extension
• Consolidate outgoings into one monthly payment
• Business purposes
• Payment of a tax bill
• A wedding or new car
• Transfer of equity
• Exit for an existing bridging facility

Some people may be benefitting from a very competitive Lifetime Tracker rate with their current mortgage provider, and would not want to change that rate.

Or, they may be locked into a fixed rate with large redemption penalties that they do not want to incur by remortgaging.

Some may want to invest in a business or pay a tax bill – these are not allowable with residential mortgage funds.

Other borrowers may have adverse credit that means they cannot get a mortgage at all, whereas a Second Charge lender can take a more personalised approach than a traditional mortgage lender.

Second Charges are generally more flexible than a normal High Street mortgage, so for the right client, and in the right circumstances they can be the right option for you.

We would always recommend that you speak to an independent adviser to check what the most suitable options are for you before taking out a second charge mortgage.