Second Charge

What is a second charge mortgage?

A second charge mortgage is a secured loan available for homeowners. 

Secured against your home, with a second charge mortgage, you continue to pay your original mortgage - also known as a 'first charge mortgage' - as they are maintained separately. If you fail to keep up with repayments and your home is repossessed, the first charge mortgage will take precedence in being repaid from the sale proceeds, before paying the second charge mortgage. 

Our team of experienced advisors have helped many people to get a great deal on their second charge mortgage. As a whole-of-market broker, we work with many lenders to get you the best rates possible.

To get started, complete our simple online form today, or keep reading to learn more. 

How do second charge mortgages work?

Your second charge mortgage lender will assess the value of your property and secure the mortgage against your home as security. 

A few points to make:

• Second charge mortgages as available as both interest-only and repayment options. 
• You can use the same lender or a different lender for your second charge mortgage. 
• A second charge mortgage can secured on any home you own, not just your primary residence. 
• The term for repayment can typically be anywhere from 1 year to 35 years. 
• You will pay interest on the loan, as with any other loan, so by paying more over a shorter period, you will pay less overall. 
• Some lenders will levy a fine for early repayments.
• Your existing mortgage provider will need to consent to a second charge against the property; some lenders are more amenable to this than others. 

What are the benefits of a second charge mortgage?

They can be speedy to arrange, depending on the circumstances, which can help if you need a rapid cash injection.

Second charge mortgages may work out cheaper than remortgaging, especially if you have favourable rates and will incur a fee for early repayment on your existing mortgage. You may find that for self-employed people, the terms are more flexible than alternative finance options, and they can also help to rebuild your credit rating. 

How much could I borrow?

The amount you will be able to borrow with a second charge mortgage will depend on a range of criteria. All lenders will have different eligibility and affordability requirements, but generally, they will assess:

• The Loan to Value ratio.
• Your income and credit rating.
• What the loan is to be used for.
• Your age. 

What if I have bad credit?

While it is not impossible to get a second charge mortgage with bad credit, it is less straightforward.

You will actually find that by managing a second charge mortgage successfully that your credit rating improves. We have helped many people with bad credit to get a second charge mortgage. There are many reasons why you might have bad credit, ranging from missing a few payments through to IVAs and bankruptcy.

There are a few things you can do to improve your score before making an application; however, it can take a few months before you see real improvements to your credit rating. 

• Access your credit report with the major agencies
• Check for any inaccuracies and apply for amendments if necessary
• Use credit sensibly and make repayments on time. 

Income and second charge mortgages

Your income will play a role in the lender assessment of your second charge mortgage application.

If you have a stable income, you will be deemed as lower risk in comparison to someone whose income varies, for example, if they are self-employed or are paid mostly in commission. Self-employed people are generally required to provide a minimum of three years of trading history; however, some lenders will consider less. 

Our advisors can help to recommend the best lenders, depending on your situation. 

Retirement and second charge mortgage

Being retired doesn't preclude you from getting a second charge mortgage.

Assuming the lender is confident in your ability to make repayments long term, you are likely to be eligible. While some lenders have a maximum applicant age limit of 75, other lenders go beyond 80. 

First-time buyers and second charge mortgage

Generally, lenders for second charge mortgage will require ownership for a minimum of six months before agreeing to a loan.

If you have minimal equity in the property, as is typical for many first-time buyers, you may be deemed as higher risk. Get in touch with one of our advisors to learn more. 

Non-standard properties and second charge mortgage

While it is more complicated to secure a second charge mortgage against a non-standard property, it is not impossible.

Non-standard properties, for example, those with thatched roofs or listed buildings, are more niche and therefore are deemed more challenging to sell. As a second charge mortgage is secured against the property, non-standard properties are seen as higher risk, meaning there is a reduced pool of lenders available.

Our advisors can help you to find the perfect lender for your non-standard property. 

Unencumbered properties and second charge mortgage

You may find it more challenging to get a second charge mortgage on a property without a mortgage or secured loan already against it.

This is because they tend to be secured over the top of a first charge mortgage. If this is your situation, let our advisors help. 

Why can second charge mortgages be helpful?

Second charge mortgages are used for a range of purposes.

Many homeowners with debt can use a second charge mortgage to consolidate their debt, which can provide a lower interest rate than unsecured loans. You may find that if you have bad credit you are offered a less favourable rate, with a reduced Loan to Value offer. 

Home improvement activity is the other main reason why people go for second charge mortgages. If you are planning an extension or garage conversion, for example, you may decide to get a second charge mortgage to fund the development. 

Getting a second charge mortgage for buy to let properties

It is possible to get a second charge mortgage on a buy-to-let property.

However, the pool of willing lenders is reduced as buy-to-let properties are seen as riskier. For more information, get in touch with one of our team who can help you to find the perfect lender. 

What happens if you don't pay back a second charge mortgage?

As a second charge mortgage is secured on your property, if you fail to make repayments, there is a risk that your home will be repossessed. 

A second charge mortgage comes second in terms of the order of payment if this happens. This means that your mortgage will be paid from the proceeds of the sale first, with the second charge mortgage being paid second.

If there is not enough cash generated from the sale to cover both mortgages, you may have to enter into an IVA or declare yourself as bankrupt. 

What are the alternatives to second charge mortgage

There are a few alternatives to consider when deciding on a second charge mortgage. The obvious option is to remortgage. You might be able to find a better mortgage deal that frees up the cash you need without entering into a new loan agreement.

You could also consider a personal loan or 0% credit card depending on the level of spend, which will not be secured on your property. 

How can I learn more?

Our team of advisors are waiting to hear from you, complete our simple form today to get started.