What is a second charge mortgage?

A second charge mortgage, also known as a homeowner loan, is a loan that’s secured against your home – just like your main (or ‘first charge’) mortgage. But rather than borrowing more from your current lender, you're taking out a separate loan from someone else. It’s a way to release some of the value in your property, perhaps to pay for big-ticket things like home improvements, debt consolidation, or even a once-in-a-lifetime event.

This can be a handy option if you don’t want to remortgage, maybe because you're locked into a good rate, or your current lender won’t lend you any more. Just keep in mind: if your home is ever sold or repossessed, your first mortgage gets paid off first. Only then does the second lender get what’s left – and if there’s a shortfall, you’ll still need to repay the rest.

Interest rates are usually a bit higher than on a standard mortgage. For this reason, it’s worth shopping around, comparing deals and looking at the overall cost, not just the monthly repayments. It’s a big decision, so make sure it really works for your finances before you go ahead.

Are you eligible for a second charge mortgage?

So, you're wondering if you're eligible for a second charge mortgage? Well, just like any other mortgage, lenders have to make sure you're able to comfortably afford it. They’ll carry out the same affordability checks and stress tests to see if you can meet future payments, just as they would for a first mortgage.

Here’s what lenders will typically want to see:

Current mortgage

You’ll need to share the details of your existing deal so they can make a decision on how much more, if any, you can borrow against your property.

Income:

Lenders will look at what you can afford each month for the extra repayments when deciding how much to lend.

Credit score:

Whilst there isn’t a specific credit score required for a mortgage, having a higher score can improve your chances of being accepted.

Outgoings

Expect lenders to look into your outgoings as well as income. They will want to know you can keep up with repayments comfortably.

Every lender’s a bit different, so it’s always worth comparing to find the right fit for your situation.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Why might I arrange a second charge mortgage?

Thinking about borrowing a bit more but don’t fancy remortgaging? A second charge mortgage could be worth a look. It’s often used when unsecured borrowing like a personal loan isn’t an option – maybe because you're self-employed or your credit score has taken a hit. Instead of starting from scratch with a whole new mortgage, a second charge lets you borrow just what you need.

So why not just remortgage? If rates have gone up since you arranged your deal, remortgaging now might mean you end up with a higher interest rate on everything you owe. A second charge mortgage keeps your original deal intact, so you only pay the higher rate on the new borrowing.

And don’t forget those pesky early repayment charges. If your current mortgage has one, remortgaging to free up some equity could cost more than it’s worth. A second charge deal might save you money: just make sure to weigh up all the options before deciding.

Points to consider before applying for a second charge mortgage

Before deciding on a second mortgage, it’s worth taking a step back and checking whether a further advance from your current lender could be a better fit. Here are a few key things to do and think about:

  • Compare deals: Rates can be higher on a second charge mortgage than a standard mortgage. Carefully check the rate, loan term and total repayment amount across lenders.

  • Read the small print: Understand the exact terms, interest rates, fees, what could happen if rates rise and any early repayment charges before signing anything.

  • Take your time: Lenders must give you a 'reflection period' of at least seven days to think things over.

  • Know what happens if you sell your home: If you sell your property or it’s repossessed, the first mortgage gets paid off first. But be aware, the second mortgage lender can still chase you for any remaining balance. Always make sure you fully understand the risk before going ahead.

  • Consider remortgaging: If your current mortgage doesn’t have a hefty early repayment charge, you’ve got some equity in your home, and your situation hasn’t changed, remortgaging might be a better option than taking out a second charge mortgage.

Remember… your home could be repossessed if you don’t keep up repayments on your mortgage, so make sure you’re comfortable with what you can afford before taking the plunge.

Mortgage guides

Answering your questions about second charge mortgages

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