Second Charge Mortgages

A second charge mortgage is an additional loan secured against a property that already has a main or first charge mortgage.

Your existing mortgage lender holds the first legal charge over the property. The second charge lender takes an additional legal charge behind it.

If the property is sold or repossessed, the first charge mortgage is normally repaid before the second charge mortgage. However, you remain responsible for repaying both loans.

Second charge mortgages are also commonly known as:

• Secured loans
• Homeowner loans
• Second mortgages
• Second charge loans

A second charge mortgage allows you to access some of the equity in your property while leaving your existing mortgage in place.

You borrow an agreed amount from a second charge lender and repay it through monthly instalments over a set term. These payments are made separately from your existing mortgage payments.

The second charge lender will assess:

• Your income and expenditure
• Your existing mortgage balance
• The value of your property
• Your available equity
• Your credit history
• Existing loans and financial commitments
• The purpose of the borrowing
• Whether the new payments are affordable

The lender may also need consent from your first mortgage lender before registering its charge against the property.

The amount available will depend on your property equity, income, expenditure and the lender’s criteria.

Your equity is broadly calculated by subtracting your outstanding mortgage balance from the current value of your property.

For example, if your home is worth £300,000 and your existing mortgage balance is £180,000, you have approximately £120,000 of equity. However, this does not mean you can borrow the full £120,000.

The lender will normally impose a maximum combined loan-to-value. This considers your existing mortgage and proposed second charge loan together as a percentage of the property value.

The amount available must also be affordable based on your income and financial commitments.

Second charge mortgages are offered by specialist lenders with different lending criteria, interest rates and fee structures.

MortgageKey can help you:

• Review your borrowing requirements
• Assess your income and expenditure
• Compare a second charge with remortgaging
• Consider a further advance or unsecured borrowing
• Examine the total cost of debt consolidation
• Compare options from a range of lenders
• Understand the fees and early repayment charges
• Complete and progress your application
• Arrange repayment of existing debts where required

Any recommendation will be based on your needs, financial circumstances and ability to maintain the repayments.