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What is a Second Charge on a Mortgage?

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Second Charge on a Mortgage are often more commonly referred to as a ‘second mortgages’, ‘secured loans’ or ‘home owner equity loans’ in the UK.

What is a second charge loan? Well, they are known as a ‘mortgage second charge’ or ‘second charge loans’ because they have secondary priority charge behind a main (or 1’st charge) primary mortgage.

This now means you will have 2 mortgages on your property. As such, we will examine here the pros & cons associated with taking one out, plus some other alternative options to perhaps consider.

‘Second Charge Mortgages’ are often used as a way to raise further money against the equity in your domestic property.

This maybe perhaps when it is not possible (or preferable) to increase the main first charge mortgage via a further advance or remortgage, so second charge finance option is maybe the way to go.

With a second charge on a mortgage broker deal, you may be able to borrow larger sum of money with a longer repayment term, than other types of unsecured finance.

The nature of second charge mortgages are that they are legally secured to assets that you may own ie; usually your residential property or other substantial assets you may own.

Many 2nd charge lenders terms in the 2020’s may also offer lower interest rates than say unsecured loans & for larger amounts.

The reason behind this is because ‘second charge mortgage lenders’ potentially have a lower financial risk exposure ie; they always have recourse to seize back your property assets – should you be unable to meet all the regular repayments.

  • Second Mortgage’ Secured Home Loan deals can be used for most purposes…
  • Home Improvements, Debt Consolidation, Education Fees, Business Setup, Holiday of a Lifetime
  • Or help to buy a 2nd Home for Family or Holiday Home
  • Available generally on longer term basis than unsecured loans e.g. 25 years
  • Or on a shorter term ‘bridge’ basis of up to 12 months

Note: Making regular repayments upon time to any secured finance with your 2nd charge lender is crucial to maintaining your credit status in the longer term. Please contact us >

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Can I get a 2nd mortgage?

Can I get a 2nd mortgage will depend (apart from your property equity values), on you being able to show a good track record at paying off your main mortgage ie; are you a good finance risk?

This means you being up to date with your regular monthly mortgage & bill repayments. Also, these bills should be paid on time.

2nd Mortgage Lenders must also comply with FCA responsible lending & financing rules (that also cover your main first charge residential mortgages).

This means second mortgages lenders should carry out the same affordability checks or loan to income limits (LTI), which are regularly reviewed by the FCA .

A few years ago this meant 2nd charge lending must also stress test your ability to meet future payments. However despite much debate, these rules were set to maybe change in 2022.

  • So yes, you can have more than 1 mortgage at anytime
  • Can I get a 2nd mortgage means for some Lenders they will take your existing mortgage repayments plus other property related costs into account, for their affordability calculations
  • Your ability to get a second home mortgage will depend on (amongst other things) your likelihood to be able to meet both 1st & 2nd charge payments

How much Second Mortgage can I get?

How much Second Mortgage can I get …or in other words borrow, will initially also depend on the amount of equity you have built up in your property.

This equity is the percentage % of your property owned outright by you = the value of the home less any mortgage finance owed on it.

For example, if your property is worth £275,000 and your 1st mortgage is £125,000 then you have £150,000 equity available for a 2nd mortgage.

Any further secured finance will be measured by this £150,000 equity example you have in your property as security against another ‘2nd mortgage’.

In the 2020’s, with fluctuating UK property prices this amount is made harder to calculate, as some lenders become more risk averse.

As such, this amount will also vary between those 2nd mortgage lenders. Unsure then Please contact us about a 2nd mortgage >

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Second Charge Mortgage Lending

To proceed with a ‘Second Charge on a Mortgage’ deal our whole of market second charge mortgage brokers will need to know…

  • Purpose of your Secured Loan
  • Amounts Borrowed & Term
  • Credit history file
  • Income & Outgoings
  • Personal Financial details
  • Employment status | Employed or Self Employed
  • Properties Loan to Value (LTV)

From this they can search the second charge mortgages market checking for the best secured mortgage loan deal relevant to your personal situation. Please contact us >

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‘Second Mortgages’ & Property Valuation

The best way to establish how much equity you may have, is by getting an indication up to date valuation of your property.

There are many free online valuations like; Zoopla, Onthemarket or Yopa. But these can often vastly vary in their approximate valuations by £100,000+ from their lowest to highest estimates.

Also what these won’t do, is raise any issues if you may have property problems like rising damp or subsidence.

Alternatively, a local estate agent or valuer may kindly advise for free as a rough guide, how much your property is currently worth. 

The amount 2nd charge mortgage lenders will allow you to borrow may vary, but secured loans usually from £3,000 upwards often to over £2 million.

Often larger sums are available for bridging finance. Note: All ‘second mortgage’ loans are subject to the lenders individual criteria.

Often the higher equity you have in your property, then the better your chances are of being accepted towards 2nd charge borrowing & with lower interest rates.

However, around 75% of the equity in your property in the 2020’s is a fair average for second charge mortgage lending ie; uk property values falling

So in other words, you can usually borrow a little less with your 2’nd legal charge than your 1’st main charge mortgage.

The reason being risk wise, your lender here now has a 2’nd priority risk in line to receive funds and make a credit claim. Should you unfortunately default, they have the added complications in the event of a repossession.

As whole market brokers we deal with many leading ‘second charge lenders’ offering competitive ‘second charge loans’.

Some lenders also allow a 3rd legal charge, should you ever require even more additional funding on top, although this is quite rare nowadays. Please contact us >

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‘Second Charge on a Property’ vs Remortgage

Due to rising interest rates in the 2020’s and the cost of living crisis, more people are looking online into whether to consider a Second Charge on a Property vs a Remortgage.

It is best to fully understand some of the key differences re your options & before you make a large financial decision.

A remortgage is when you switch & move your current mortgage across to another lender or another product. This usually does not involve you selling up & moving home.

However, it will mean you re-negotiating or replacing your first mortgage on your property with another.

Remortgaging is often not free & for some people can come at a cost. When you remortgage, you could have to pay an early exit redemption fee & then possibly a new remortgage setup admin charge.

Thereafter the new remortgage Lender will also likely charge their legal & survey costs, so it is important to calculate whether these savings can make it worthwhile switching.

Note: Some mainstream first mortgage providers, may only remortgage or lend to their existing customers. These deals also may not necessarily offer the cheapest interest rates but perhaps you don’t want to shop around?

Should you not wish to remortgage, as you believe it is not in your interests, then you could be better off using a specialist Second Charge on a Property lender, particularly if your situation is slightly more complex eg; adverse credit since taken out your original mortgage.

Further Loan Advance vs ‘Second Charge Loans’

A further advance is similar to a ‘2nd charge loan’ ie; you will take additional borrowing secured against your property and that is in additional to your first main mortgage.

You maybe able to combine a further advance to borrow additional money and then product transfer switch over to a new rate on existing borrowing in one single application, if it makes financial sense.

Some lenders will not permit a Further Loan advance within 6 months of completion of the original main mortgage. Usually if your existing mortgage is in arrears, then your lenders may not accept a further advance application.

Further advances are often not accepted on shared equity schemes. If the further advance is above say 80% LTV, often a property revaluation will be required with associated revaluation fees.

Unlike ‘second charge loans’ you will be probably dealing with your existing lender. However, let’s now examine some of the reasons why people would look into either options. Please contact us >

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Often people remortgage or take a further advance in order to…

  1. Borrow more
  2. Current deal is ending
  3. After a better interest rate
  4. Want a more flexible mortgage
  5. Worried about interest rates increasing
  6. Switch from interest-only over to repayment style
  7. You now want to overpay & your lender won’t let you

Top 10 Reasons for Second Charge on a Property…

So given the above options, let us now look at various Top 10 reasons why a ‘second charge on a property’ could be another option (rather than just remortgaging).

  1. First mortgage is on interest only & you do not want to remortgage over to repayment
  2. Unable to get an unsecured personal loan due to credit status, amounts required or term
  3. Want to borrow beyond normal retirement age & they won’t allow that
  4. Need a loan term over 10 years+ period to make regular payments more affordable
  5. Locked into a long term first charge mortgage at a low fixed rate & which makes no sense to cancel
  6. High early exit penalty fees applied by your first charge mortgage lender
  7. 1st charge mortgage lender won’t allow you to borrow anymore based on income multiples or business accounts
  8. Credit status has changed for the worse since you originally took first charge mortgage
  9. Need to consolidate existing unsecured credit that a remortgage lender may not allow
  10. Trapped mortgage lender prisoner & unable to switch as you don’t pass their current strict affordability tests

Note: These above examples will all depend on your personal circumstances & so are not to be considered advice. 2nd charge loans interest rates maybe higher than on your first or main mortgage. Please contact us >

Second Charge on a Mortgage

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Remember, if you are looking to raise finance, always consider firstly either re-approaching your existing lender or ask them about an unsecured personal loan as alternative finance options.

If this doesn’t work for you, then our 2nd charge mortgage brokers would be happy to help instead.

‘How to put a Second Charge on Property’

‘How to put a Second Charge on Property’ may start right here by you kindly making your enquiry via our ‘second charge mortgage broker’.

Our whole of market brokers are able to best review your circumstances and advise whether this type of loan is right for you or not.

If it is, our brokers can best advise you which maybe the most appropriate ‘second charge mortgage lenders uk’ to approach for you.

Not all main stream mortgage providers are also second charge lenders uk – as it is a niche marketplace. You may not have heard of some of these providers, as we have access to the whole of market.

So our ‘second charge mortgage brokers’ who are familiar with the market can save you both the time, stress & cost of wasted paperwork.

Second Mortgages Loans

They may also be able to secure you the best second mortgages loans & terms plus negotiate with those providers on your behalf and get you access to these exclusive deals.

Don’t forget this means you would be now in effect taking out 2 mortgages. Technically therefore, you are twice financially liable for your repayments against the security of your property bricks & mortar.

So your 1st charge would usually be your mortgage ie; first priority payments charged ahead of the 2nd charge payment.

You will also need to get written legal permission from your existing mortgage lender ie; give their ‘legal consent to 2nd charge’ before you can apply.

This consent should ideally be done as early as possible in the process, as some providers may be more willing than others to give their consent.

Some lenders administration can be a little slow to access the necessary documentation. Finally, your new ‘second charge lending’ provider may also wish to obtain a valuation on your property. Please contact us >

Second Charge on Mortgage

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2nd Charge Bridging Loans

2nd charge bridging loans are short term finance, designed to help progress property plans swiftly.

Second charge bridging loans allow you to then utilise the property without the need to consider a remortgage or change mortgage terms with your existing lender.

If you are after a 2nd charge bridging loan, you will probably already have a first mortgage charge secured against your property.

A second charge bridging loan allows you to unlock further equity, so then move forwards with any property renovation or investment plans you may have.

Typically second charge bridging finance are for a term of 3 upto 20+ months ie; second charge bridge is for a much shorter period of time than full 2nd charge mortgage, and usually for properties in England & Wales.

Can you Remortgage a 2nd Charge Mortgage?

Yes, it is possible to remortgage your 2nd charge mortgage to another. For example, if you have found a better finance rate or deal.

However, you may find it harder than remortgaging your main mortgage, due to the second charge on a mortgage lenders additional risk.

But provided you have made regular loan payments, your credit profile is still okay, and your income & outgoings show your finances are well managed, then it is worth reviewing.

Conversely, if your main 1st mortgage terms are now worth remortgaging eg; a good fixed rate deal has ended, you could now review & combine both 1st & 2nd charge mortgages.

What happens if you want to move house?

If you want to sell your home, you will need to pay off both your second charge on mortgage, as well as your first charge.

Sometimes, your ‘second mortgages’ lender may allow you transfer your 2nd charge on property mortgage across to a new property. Please contact us >

Mortgage for Second Home?

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Looking for a deal on Mortgages Second Homes? If so, our mortgage finance brokers can also help you.

Your mortgage for second home deal could be because you want to…

  • Help a family member buy a property
  • Buy a holiday home for all the family in the UK (not abroad)
  • Second home to live nearer family that have moved a distance
  • Buy to Let property to top up your income or as an investment

If you do not intend to rent out that second home, then you should be able to take out a fairly standard mortgages second home property deal. You will also have to pay additional Stamp Duty on purchasing a Second Home.

To help you buy a second home mortgage deal, the lenders will now want to check you can afford to get both a 2nd mortgage, alongside your current mortgage repayments.

This means you may now probably need a larger deposit when reckoning your ‘second mortgage calculator’. This deposit will depend on market conditions.

Typically expect to have saved around 15% plus required if doing a calculator for second mortgage based on the second home value. This could be cash or using available equity from the first property.

Note: To get a second mortgage may also mean some Lenders’ may possibly charge you a slightly higher interest rate & costs than on your first charge mortgage. This will be based on their lending risk assessment.

If however you are intending to get a second mortgage to purely then rent out the second home, most lenders will consider this as a non mainstream loan.

‘Second Home Calculator Mortgage’

A ‘Mortgage for second home calculator’ is unlike a mortgage for first home calculator in the 2020’s & when it comes to agreeing any second home finance.

Lender deals nowadays for ‘second home mortgage rates’ often seem to vary on their different requirements, rather than state it is all based around income.

So, some lenders have placed additional restrictions for a Mortgage for Second Home, in order to reduce their financial lending risks.

For example, some building societies require that if they are lending second mortgages loans for a second home, then that second home property purchase price…must not be more than their main first home.

Or, others may insist that they will currently only lend to people with minimum income levels, that would more than help cover both mortgage payments ie; loan affordability. Please contact us >

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‘Second Home Stamp Duty’

Stamp Duty is a type of tax you pay when buying a property or piece of land in the UK. It has different names depending where you buy.

In England and Northern Ireland it is called ‘Stamp Duty Land Tax’. In Wales ‘Land Transaction Tax’. In Scotland it is instead called ‘Land and Buildings Transaction Tax’.

‘Second Charge Mortgage’ Life Insurance

Whilst either looking to raise money or consolidating debts, it is easy to forget (especially if this a joint mortgage) that you should also consider insuring that extra ‘mortgage second charge’.

You probably may have some protection in place on your first mortgage? However, as you are now borrowing more this also means reconsidering more insurance for your second charge Loans.

For example, it could be the new loan term is now longer or now set up in joint names, so maybe your existing mortgage protection insurance cover policy is now inappropriate?

Do you need Insurance for ‘Second Charge Mortgages’?

This is a valid question if 2 people now take out a new joint second charge on mortgage (whether married or in a couple) and those 2 people are also named on the joint mortgage deed?

Then your ‘2nd charge mortgage’ lender can potentially go after either one of you, for the full repayment of that joint mortgage debt.

This means if one of you sadly died, or is critically ill, then the other person could be left with the full debt repayment. If this happens to the main family breadwinner, the situation could be even worse.

The surviving partner can now be legally pursued by the Lender for future ongoing second charge mortgage repayments. At your worst time, the situation could get even worse unhappy face

Considering taking out ‘2nd charge mortgage’ or remortgaging & now wondering…Do you need Life Insurance for 2nd charge mortgages?

Then, please consider these reasons for Your 3 x Maybe….

Mortgage Protection Life Insurance - Maybe Your 3 x ‘Maybe’

  1. YOUR HOME ‘Maybe’ your biggest asset
  2. YOUR HOME LOAN ‘Maybe’ your biggest debt
  3. YOUR HOME ‘Maybe’ repossessed if you do not keep up repayments on your ‘2nd charge mortgage’

Life Insurance for just Second Charges Mortgages?

When looking at life insurance for just 2nd charge mortgages, also look at the wider picture of what may happen if the worst sadly happens. People often forget about this bigger picture & just concentrate solely on covering just their second charge mortgage loan with insurance.

Although that particular life policy has maybe now paid out, you may still need to have ongoing income to pay your regular bills. If not, and say the main breadwinner had died, would you now have to sell your home?

  • Your 2nd charge mortgage loan payments are only part of your regular monthly outgoings
  • Other ongoing expenses include Food, Gas, Electric, Travel, Credit cards, Mobile, Utilities etc;
  • Regular monthly bills will not stop coming in if sadly someone dies
  • Likewise you would also still have to cover funeral costs and maybe repay other debts
  • It makes sense to have both a Second Charge Mortgage Life Insurance & Family Life Insurance if you have dependants (young or old)

2nd charge Mortgage Life Insurance = Decreasing Term Insurance?

  • This Protection is designed to help insure a ‘repayment style’ second charge mortgage or other secured debt
  • The 2nd charge debt amount you owe will then reduce over the mortgage term if you keep up your repayments
  • A decreasing term insurance policy will also therefore reduce over its term or time period
  • The plan payments however stay the same throughout the average cost life insurance policy
  • Cover is ‘underwritten’ so Insurers ask you medical lifestyle questions before offering terms
Chances of making a insurance claim | Uk Life Insurance Quotes > 15 secs

Why is Critical Illness Cover* alot more expensive?

  • People often like the option of including critical illness insurance with their mortgage protection insurance
  • Critical Illness* covers a large number of risks [could be 50/100+ benefits] to help repay 2nd charge mortgages
  • Statistically you are far more likely to be making a claim on critical illness cover, if included than just lifecover
  • For example, 50% of people will be diagnosed with a form of cancer in their lifetime [Cancer Research UK]
  • It pays out on survival & recovery via specified benefit types eg; cancer, heart attack, stroke, multiple sclerosis etc;
  • Note:Terminal illness benefit is often included ‘free’ as part of a Life insurance Policy
  • Terminal Illness however on an insurance policy means you have sadly less than 12 months to live ie; won’t survive
  • Do not confuse these 2 loan protection benefits

What is Mortgage Payments Protection Insurance (MPPI)?

  • MPPI covers your payments against accident, sickness & hospitalisation
  • Designed to cover 2nd charge mortgages payments but not life insurance for death
  • A short term cover plan & usually paid for upto 12 months. May also cover unemployment & some bills
  • Some new Insurers may not offer unemployment part of policy due to the Coronavirus pandemic
  • Home Loan Protection Payment is the same as PPI. However, the codes for this product sale have tightened
  • Various risks, pre-existing issues or employment problems may well have initial exclusions after policy starts
  • Not medically underwritten [unlike PHI Income Insurance] meaning cover is offered with no medical tests or GP reports

Mortgage Payments Income Protection Insurance (PHI)

  • Designed to pay out Tax Free Income longer term to help cover mortgage payments & ongoing bills
  • Usually PHI has an initial waiting or deferred / waiting period from 1/4/8/13/26/52 weeks 
  • Insurers Plans on a claim can usually run the term of the 2nd charge mortgage or upto age 70
  • Medical evidence is usually required for underwritten PHI insurance before any terms offered
  • Cover may be based on maximum of say upto 70% of your pre-tax gross annual earnings

Conclusion on Second Charge on a Mortgage

Having read this review and decided a ‘second charge on a mortgage’ may be your financial solution? You have considered their various pros & cons we raised.

So, whether you wish to go direct, having read this ‘second charge mortgages’ guidance. Or instead, prefer to speak to a professional broker. You pay’s your money & takes your choice. 

Note: Money Saving Expert Martin Lewis on Secured Loans or 2nd charge mortgages is not a big fan but does appreciate that they do have their place for some people.

Martin Lewis says they should be considered only as a last resort …..only to consolidate debts & only if it means overall you are paying less for your debts.

As 2nd charge mortgage brokers we would say that remember, you are not clearing your debts, just re-organizing them to hopefully ensure that they are fully cleared in the future.

As secured charge mortgage brokers, our Finance Brokerage are FCA regulated, so are well placed to help you out.

Whatever your credit status, good, bad or poor…please contact us for help re your ideal financial solutions. Note, since the pandemic many financial advice services have now changed. 

Face to face is where advice is delivered by a qualified broker, who will travel to a customer’s home or other location of choice. There, they will discuss your needs allowing any family members to be present & involved in the decision making process for ‘second charge loans’.

Telephone advice is where the advice is provided primarily over the telephone or on zoom by a qualified mortgage or 2nd charge mortgage broker. This is then supported by an appropriate call centre for the purpose, with call recording, data storage and appropriate monitoring procedures in place.

Unsure, need a suitably qualified FCA regulated broker help? Please contact us >

Article on ‘Second Charge on a Mortgage’ UK review by Martyn Spencer Financial Adviser

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