Compare Second Charge Mortgages

Second charge mortgages are second mortgages or loans secured against a borrower’s property. This type of loan is sometimes referred to as a second mortgage as lenders must now apply similarly robust lending criteria to these loans as they do to initial or first mortgages.

Despite the secured loans being called second charge mortgages, borrowers do not use the money borrowed to fund the purchase of a property. Instead, second charge mortgages can be taken out to fund things like extensions and home improvements or consolidate debt.

Second charge mortgages are secured homeowner loans offered to borrowers who have equity in a property, which they can put forward as security for the loan. Lenders can offer larger loan amounts and longer loan terms for this type of borrowing. However, you must remember that your home is a risk if you cannot keep up with repayments.

Since 2014, lenders have been required to impose the same affordability checks on borrowers of second mortgages as those taking out initial or first mortgages, in order to prevent people borrowing more than they can pay back. As a result, your credit record and your income will be taken into account by lenders when considering your application for a second charge mortgage.

The equity you hold in your property is simply the value of your home, minus the mortgage repayment total you still owe on it. So if your home is worth £250,000 and you have a £150,000 mortgage still to repay, you have £100,000 of equity in your home. The amount you will be offered by a lender for a second mortgage will be based on this equity amount, alongside other factors such as your income and credit history.

If your credit rating has been damaged since you took out your first mortgage, for example, you may find that you struggle to secure a good mortgage deal when remortgaging. Taking out a second-charge mortgage can sometimes be an alternative option

However, in many cases, a remortgage deal will be cheaper and easier to arrange than a second charge mortgage, make sure you consider and compare these costs.

When you sell your home, the first mortgage you have taken out is cleared as a priority over the second charge mortgage, but the lender may pursue you for the repayment. You will need to clear the second mortgage when you sell your house and, as a result, it is important to check whether you will be liable for any early repayment charges.