Second charge lending, also known as a second charge mortgage, is a type of secured loan that allows homeowners to borrow money by using the equity in their property, alongside their existing mortgage.

The basics of second charge lending

If you already have an existing mortgage, it means that you already have a primary mortgage on your property. This is the first charge on the property, meaning that if the property were to be sold, the proceeds would first go toward paying off the primary mortgage. With second charge lending, as the homeowner, you can take out an additional loan secured against the same property. This loan is separate from the primary mortgage and is considered a “second charge” because it ranks behind the primary mortgage in terms of priority. The amount that can be borrowed through a second charge loan is typically determined by the amount of equity the homeowner has in their property.  Like primary mortgages, second charge loans typically have regular monthly repayments over a fixed term. The repayment term and interest rate can vary depending on the lender and the borrower’s creditworthiness.

The purpose of a second charge mortgage

Second charge lending offers a range of benefits for homeowners seeking to leverage their home assets for various purposes. Whether it’s consolidating debts, financing home improvements, or exploring opportunities for increased income, second charge lending presents an array of advantages.

Some of our clients choose second charges because they can provide homeowners with a strategic avenue to access additional funds without the need to break current mortgage deals and incur Early Repayment Charges (ERCs). Moreover, second charge mortgages often allow for higher income multiples, providing borrowers with increased borrowing capacity.

What risks are there?

It’s important to note that second charge lending carries some risk. If you as the borrower default on both the primary mortgage and the second charge loan, the property could be repossessed to cover the debts. Additionally, taking out a second charge loan increases the total debt secured against the property, which could affect your financial stability and ability to borrow in the future.

How we can help

We’ve fostered strong relationships with lenders and are up to date with their product offerings.  We can efficiently match you with a tailored solution that addresses your unique circumstances, giving you the flexibility you need.  From conducting comprehensive financial assessments to sourcing competitive loan options and navigating the application process, we’re here to help you harness the benefits of second charge lending.

Ready to take the first step? Read more to learn more or Reach out to the team to see how we can help.