Second Charge Finance
Second charge mortgages are forms of secured loans meaning that they use the equity in the borrower’s home as security. Many people use them as a quick way to raise money, avoiding the complications and risk associated with remortgaging but there are things you need to be aware of before you consider applying for a second charge mortgage.
Some key points of second charge are:
- As a second charge mortgage will be secured against the equity you hold in your property, your home could be at risk if you fail to make the repayments on the loan.
- Your existing first charge mortgage lender may have to be consulted on the terms of the proposed second charge loan.
- Not all mortgage brokers advise on second-charge mortgages so a specialist in this field may be required
Find out more about what a second charge mortgage loan is and if you can get one.
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Common Uses of Second Mortgages
Common Uses of Second Charge Mortgages
Here are a few common ways to use a second charge mortgage.
- Property financing through: Bridging loans, BTL mortgages, development finance, financing an auction purchase or financing a property refurbishment. All are are common uses for second charge mortgage loans.
- Home improvements: Renovations and refurbishment are common uses for second charge mortgage funding either to be repaid over a sensible term or when the property is sold, if the refurbishment was to prepare for its sale at a higher market value.
- Debt consolidation: Second charge mortgages will usually get you a lower rate of interest than would be the case with an other forms of unsecured credit and because of this, are often used to wipe out expensive debts.
Note: Your home is at risk if you do not keep up the repayments on a loan secured on it.
Secured vs Unsecured Finance – What are the fundamental differences?
Secured loans are given against an asset as security and are common for borrowers with a poorer credit score and in need of a substantial amount of money. By putting a valuable asset up as security also demonstrates to lenders that you are committed to paying back the loan and can also be beneficial to secure to a better interest rate.
Secured Loans
Unsecured Loans
Case Studies
Debt Consolidation
Mr and Mrs C were looking to raise £60,000 for debt consolidation and also to make some home improvements on their residential property. They did not want to remortgage their residential property because of the low rate they were enjoying and which they did not want to lose. Because of a lack of equity in the residential property…
Secured Loan
Miss S was introduced to us via a secured loan broker who had already tried to obtain a loan for her directly. The client was looking for £25,000 to enable her to purchase a vehicle for work and to pay off some credit card debts. Due to the non standard construction of the securing property not meeting lenders criteria…
Buy-to-Let Mortgage
Mr & Mrs H is an existing client who was looking to raise finance in a hurry. The securing property was a BTL rented out property and there was already a secured loan on the property which she wanted to repay, along with several other debts which together were costing her £1,245 per month.
Bridging Loan
Mr K was looking to raise £85,000 in order to repay a bridging loan on his UK property as it was reaching the end of its term. The main issues that the client was facing was that he was currently residing in Dubai and the property was being let out in his absence. In addition, the rental income being achieved was only..