At Just Mortgage Brokers, we have years of experience in helping people secure borrowing for a variety of purposes. While many of our customers are looking for mortgages to buy their first home, move home, or remortgage for a better deal, we also have access to a wide range of financial products suitable for a variety of financial needs – and this includes second charge mortgages.
What is a second charge mortgage?
If you already have a mortgage on your property but have available equity, it may be possible to borrow money by securing a second mortgage against your home. This is usually known as a second charge mortgage – the “charge” refers to the legal security levied against your home. Because a second charge mortgage is secured against your property, it’s important to be aware that you could lose your home if you fall behind with payments, the same as if you fell into arrears with your main mortgage.
What are the most common uses for a second charge mortgage?
A second charge mortgage can be seen as an alternative to taking out a personal loan, or other types of unsecured borrowing. Second charge mortgage amounts can be as low as £1,000, with the upper limit defined only by the equity available in your property and the lender’s assessment of your ability to afford the loan. As such, it can be used for a wide variety of purposes. Examples include, but are not limited to:
- Home improvements
- School or university fees
- Vehicle purchase
- A family wedding
- Debt consolidation
- Business purposes
- Buy-to-let property purchase
Why could a second charge mortgage be preferable to remortgaging?
Many homeowners who want to raise funds opt to remortgage – transferring their existing mortgage debt to a new lender, while raising additional funds against the equity in the property. However, there are some scenarios where a second charge mortgage can be preferable to remortgaging.
If interest rates have risen since you took out your current mortgage – or if you have experienced credit problems in the meantime – then the remortgage rates currently available to you may be higher than you’re paying on your current mortgage. Similarly, if you are tied in to your current mortgage deal with substantial early repayment charges, then a second charge mortgage may be a less expensive way of securing additional borrowing than if you were to remortgage.
What are the risks of second charge mortgages?
As mentioned previously, a second charge mortgage is secured against your property, meaning you could potentially lose your home should you fall into arrears with your payments. It’s therefore important to consider whether to secure borrowing against your home, as opposed to taking out a personal loan or other form of unsecured lending.
If you are looking to take out a second charge mortgage to consolidate debts, it’s also important consider the overall cost of the borrowing over the term of the mortgage. While the interest rate on a second charge mortgage is likely to be lower than you are paying on your current unsecured debts, extending the borrowing over a longer term can often end up being more expensive in the long run.
What interest rates are available with second charge mortgages?
There is a wide range of second charge mortgages on the market. The interest rates can vary depending on the prevailing interest rates at the time, your credit rating, and the amount you are looking to borrow against the equity in your home.
How Just Mortgage Brokers can help
If you are looking to borrow money for any purpose, we can help advise you on the type of borrowing that might best suit your unique circumstances, whether that be a second charge mortgage, remortgaging, or some other form of lending. Contact us today to discuss how we can help you raise the funds you need.