Specialist Mortgage Advice
04. Second Charge Mortgages
Second Charge Mortgages explained
Second charge mortgages exist where additional funding is desired on a property which already has a mortgage against it but for various reasons you may not find it desirable to redeem the existing mortgage.
With a second charge mortgage the existing mortgage continues as before but another mortgage is taken out on the same property. If the property is sold, the existing mortgage company has first charge on the property with remaining funds being used to clear the second charge only after the first charge is paid in full.
Please note if the second charge loan cannot be cleared from the remaining funds the second charge provider may still pursue you for any amount still owed.
Why people choose to take out a Second Charge Mortgage
There are numerous reasons why you may choose to go down the route of a second charge mortgage:
the first charge mortgage is still within an Early Repayment Charge period so in order to re-mortgage for a higher borrowed amount you would incur additional costs
your personal circumstances have changed, such as a move into self-employment and as a result you’re struggling to get a personal loan or another form of unsecured borrowing
perhaps your credit rating is not as strong as it was when you took out your first mortgage. A new mortgage could be on a higher rate on your entire borrowed amount whereas a second mortgage means a higher rate of interest is only payable on the new additional amount you are seeking to borrow
Considerations before taking out a Second Charge Mortgage
There are several important factors to consider before taking out a second charge mortgage.
First of all you should note that a second charge mortgage typically charges a higher interest rate than normal mortgages so as to compensate the lender for the additional risks involved. It is therefore essential that when you are selecting a mortgage broker to give you the best advice they are not restricted to a small panel of providers. Here at Ipothica Specialist Mortgages we look across the market to secure the lowest rate we can.
Secondly, if your goal is to consolidate smaller debts you need to remember that a mortgage is for a long period and as such you may end up paying a lot more interest in total. Similarly, you should also not look to take out a second charge mortgage if you are already struggling to keep up payments on your first mortgage. Unlike credit card debt and small unsecured loans, second charge mortgages are secured on your property which increases the risk of your property being repossessed if you cannot keep up repayments on either your first charge mortgage or the second charge mortgage.
Again it is therefore essential to go through a thorough advice process with a specialist mortgage adviser. Please get in touch so we may assist you by calling the number above.
Getting help and advice
Given the nature of theses products it is essential to get advice from someone with access to different solutions and multiple lenders. If you are considering a second charge mortgage but are unsure if it is the best option, please do get in touch by contacting us on 0333 300 1874 or else clicking the 'Get in touch' button below.
We have direct access to many residential and commercial mortgage providers and will explore opportunities with numerous lenders who are likely to look favourably upon your individual circumstances.
Please note, all loans are subject to a credit search and valuation.
Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.
Ipothica Specialist Mortgage Advice
Here to help you
If you need help obtaining short term finance we can speak to a range of lenders to get finance terms that are right for you.
Simply call 0333 300 1874 or else make contact using the button below.