Finding a second charge mortgage

The term ‘charge’ means the security held by the lender in your property, which means they have the right to repossess the premises should you not be able to keep up with the agreed repayments.

Uses of a second charge mortgage

Second charge mortgages are often used as a cost-effective way of accessing lending, at better interest rates than those available through other loans. The maximum value of a second charge mortgage depends on the amount of equity available in your property, and the affordability assessment a lender will conduct.

Examples of reasons homeowners may wish to consider a second charge mortgage include:

1. Renovations or improvements to the property
2. Covering large expenditure such as weddings, purchasing a vehicle or making an investment
3. Paying for expenses such as university fees
4. Consolidating other loans into one repayment
5. Investing in a buy to let property

Second charge mortgages vs. remortgaging

A second charge mortgage is an alternative to remortgaging. If your existing mortgage is at fixed interest rates that are lower than the current rates on offer, or if you have reason to suspect a remortgage application might be rejected, it may be more cost-effective to opt for a second charge mortgage. Another reason homeowners apply for second charge mortgages is that they are tied into their existing mortgage deal, and are unable to remortgage to raise finances through a new lender.

Disadvantages of second charge mortgages

The main risk to consider is the charge held against your property, and the potential repossession of your home should you not keep up to date with your mortgage payments. As with any mortgage, it is important to understand all the fees and repayments involved and make sure that you can afford the repayments. If you are considering a second charge mortgage to consolidate other debt, it is essential to compare the cost of borrowing between your options before taking out a second mortgage against your home. Interest rates on mortgage lending are typically lower than for shorter-term unsecured loans, however the term is likely to be much longer and may not be more cost-effective overall.

Interest rates for second charge mortgages

The amount of interest you would expect to pay on a second charge mortgage depends on many factors. This includes the value of your property, the amount of equity available, your credit rating, and how the lender assesses your affordability. If you are thinking about a second charge mortgage, need to consider the different financing options available, or unsure about your eligibility to apply, give us a call today. Revolution Finance Brokers are experts in mortgages across all specialisms and niches and can provide bespoke advice about what your options are, and which lenders can offer the best rates for your circumstances.