Second Charge Mortgages
A second charge mortgage is exactly what it says a second mortgage on your property. The first mortgage you have is your first charge. Second charge mortgages are the same as a secured loan which means you will be able to lend a certain value from the equity in your home. The second charge is secured against your property.
Why a second mortgage?
There are several reasons for considering a second charge mortgage
- Rejected or struggling to get an unsecured loan due to circumstances
- Adverse credit event in recent years that is affecting your eligibility to remortgage. If you can’t remortgage to get a better rate it may be worth keeping your first mortgage at the current rate and taking out a second mortgage for home improvements.
- Early repayment charges on your first mortgage may also make it worth considering a second charge mortgage rather than incurring large fee’s.
The main reasons for choosing a second charge mortgage over remortgaging is when it will work out cheaper for you. If the interest payments or early repayment charges are more than the additional interest on your second mortgage it makes financial sense to use this facility.
Speak with one of our expert financial advisors who will be able to take all of your personal circumstances into consideration and help you find the most cost effective route to the finance that you need.
How do they work?
To get a second charge mortgage you must be a homeowner, this doesn’t mean that you need to live in the property that you are having the charge on though.
The amount can be anything from £1,000 upwards and the upper amount you can borrow will depend on the level of equity that you have in the property.
For example, if your home is worth £300,000 and your first mortgage is £100,000 then that means that you have £200,000 equity in your house and £200,000 will be the maximum amount you will be able to borrow. Just like with any finance if you don’t keep up with the payment you risk your home being repossessed.
Can I get a second mortgage?
When applying for a second charge mortgage it is very similar to the process of your first mortgage. There are stricter laws lenders must comply with when assessing affordability.
Lenders must make affordability checks to ensure that the borrower will be able to afford the additional borrowing. Lenders will also stress test the borrowers finances to ensure they will be able to cover the payments if there is a rise in interest.
Essentially lenders are looking at risk levels and calculating the level of risk there is to lend to you. If they deem the risk too high they will decline your application. There are specialist lenders our brokers work with who have more of an appetite for second mortgages than high street lenders.
What if I want sell my house?
If it’s time to move or you need to sell your home you will need to pay off your existing mortgages or transfer to a new mortgage.
When not to use a second charge mortgage.
Second charge mortgages have many uses but they are additional borrowing and putting a second charge on your home must be a though out decision.
- If you are struggling with the mortgage payments you are currently paying additional borrowing may not be for you at this time. If you fail to meet the additional payments you may lose your home.
- You may also want to consider another route if you are looking into getting a second charge mortgage to pay off smaller debts such as credit or store cards. With second mortgages being a long term finance option they additional interest may mean you pay more over the long term than you would paying off your debt quickly with a personal loan or adjusting your outgoings to make debt payments.
Before you apply for a second charge mortgage it is best to seek advice from a specialist mortgage advisor. A specialist advisor will be able to help find the best options for you and your current situation. It may be that they will be able to get you a great remortgage deal that means you will just have one payment to make.
Make sure that the broker you are using has the ability to search the whole market and compare all of the deals you are eligible for.
Finally ensure that you are aware of the exact terms of your second mortgage and know exactly what your repayments will be and the interest charged.
Get Expert Advice
For expert advice on your second charge mortgage speak with one of our expert brokers today. Our expert brokers have access to the whole market and specialist lenders who are more likely to consider applicants with credit issues. Fill in one of our call me back forms or call us today on 0161 209 6700.