What is a Second Charge Mortgage and how can it help Property Investors?

January 22, 2020
Everything you need to know about a second charge mortgage

Also known as a second charge loan, a second charge mortgage is used as security against the borrowers’ home and commonly used to raise money instead of re-mortgaging.

It allows you to use any equity you have in your home as security against another loan, meaning you will have two mortgages on your home.

Second charge mortgages are flexible and give the borrower the opportunity to access large amounts of money with terms to suit specific circumstances.

What can a second charge mortgage be used for?

Second charge mortgages can be used for a number of different purposes such as home improvements, debt consolidation or purchasing a property.

They are also used in situations where a borrower is struggling to obtain unsecured borrowing, due to being self-employed or having poor credit.

Additionally, if your first charge mortgage has a high early repayment charge, it could work out cheaper to take out a second charge mortgage rather than to re-mortgage.

Many property investors use a second charge mortgage to borrow against an existing property to raise  the capital needed for a deposit on a BTL  property.  They would take a second charge out alongside a BTL Mortgage.

When NOT to use a second charge mortgage

Second charge mortgages are a convenient product when used in the appropriate situation. Taking out a second charge mortgage is a big step and you should not get a second charge mortgage if you’re struggling to repay your current mortgage. Failing to make the repayments on your mortgage or second charge mortgage could result in you losing your home.

A reputable broker will advise you on whether a second charge mortgage is the right solution for you.

Who can get a second charge mortgage?

You have to own a home to be eligible for a second charge mortgage as the property is used as security for the loan.

However, you do not necessarily need to live in the property. As long as you own a property with a sufficient amount of equity, you may be able to access a second charge mortgage. Like all finance solutions, the application is based on your personal circumstances.

Because lenders now have to comply with stricter rules, the borrowers have to undergo the same affordability checks for a second charge as they would for a first charge or main mortgage.

This means you’ll have to provide evidence that you can afford to pay back the second charge loan.


How much can be borrowed?

A second charge mortgage can be a loan of anything from £1,000 upwards. How much you can borrow is based on the equity you have in your property.

You will need to be able to pay the repayments on the first and second charge mortgage. If you sell your home, you will need to pay off your second charge mortgage or transfer it to a new mortgage. The first charge mortgage gets cleared in full before any money goes towards paying off the second charge, however, you are still responsible for paying off the remainder of the second charge.

How long can you borrow for?

Most second charge mortgages are for 25 years, with some lenders offering longer terms. Like a normal mortgage, there is promotional fixed-rate or discount period, however, the interest rate is usually higher than a first mortgage.

Some lenders will charge an early repayment fee if you decide to pay off the mortgage earlier than the agreed duration.

What are the costs associated with second charge mortgages?

When securing a second charge mortgage, most lenders will require you to pay valuation charges, legal costs or land registry fees and a broker fee.

There will also be interest on the second charge mortgage which varies from lender to lender.

At Ramsay & White, we specialise in securing finance for first-time and experienced developers and investors.

Get in touch today to see if we can help you.

Secure the best solution for your investment.

Related Resources:

Get your Free Buy-To-Let Landlord Guide

Everything you need to know about a second charge mortgage

Industry Recognised Expertise

Our award winning team stays up-to-date on the latest products, rates, and regulations, so you can be confident that you're getting the best possible advice.

Streamlined Process

We make any property financing stress-free by guiding you every step of the way. We'll work with you to gather the required documentation and will be there to answer any questions you may have throughout the process.

Competitive Rates

As a leading expert in property finance in the UK, we have access to a wide range of mortgage products and lenders. This allows us to offer competitive rates and terms that may not be available to individual borrowers.

Customer Oriented

We understand that every client's needs are unique, which is why we take the time to understand your goals and financial situation, and work with you to find a financing solution that fits your needs.

Continued Support

After completion, we provide continued support to all of our clients, answering any questions you may have and help with any of your future property finance needs.

Get in touch today to see if we can help you.

Speak to an Advisor

a large building facade

Complete the form below and a member of our team will be in touch.

By clicking Submit you're confirming that you agree with our Privacy Policy.
Form sent successfully.
Our team member will be in contact with you shortly.
Something went wrong while submitting the form. Please try again.
News & Updates

More Insights and News:

Read our latest Property Finance insights, case studies and news.

How Much Do I Need to Retire? Understanding Pension Fund Sizes to Achieve Your Desired Income

How Much Do I Need to Retire? Understanding Pension Fund Sizes to Achieve Your Desired Income

Planning for retirement can seem like a daunting task, but understanding how much you need to save can make the process clearer and more manageable.
The Benefits of Making Pension Contributions as a Limited Company Director

The Benefits of Making Pension Contributions as a Limited Company Director

Explore the significant benefits of making pension contributions from your limited company and how it can enhance your long-term financial security.
Unlocking Potential: Portfolio Restructuring with Bridging Finance

Unlocking Potential: Portfolio Restructuring with Bridging Finance

Portfolio restructuring can be a powerful tool in optimising your investments, and bridging finance offers a flexible and efficient means to facilitate this transformation.

Experts in Property Finance

Short Paragraph relating to the header and directing to CTA.

a view of the city of london at sunset