A ‘Second Charge Mortgage’ is a loan secured against the equity you have built up in your property. For UK homeowners, it’s an alternative to re-mortgaging or taking out an unsecured loan that usually comes with a much higher rate of interest.
A ‘Second Charge Mortgage,’ sometimes referred to as a secured loan or homeowner loan, can not only be used for home improvements, but also, almost any other legal purpose. For example, paying for a wedding or a childs university fees or even for consolidating other debts that have higher rates of interest.
Your Second Charge Mortgage is separate from your original ‘First Charge Mortgage’ but works in the same way, with pre-set monthly payments. Furthermore, the criteria for obtaining a ‘Second Charge Mortgage’ is much the same as applying for any mortgage product. Besides checking to see if you have enough equity in your home and looking into the LTV (loan to value), you would be subject to all the usual credit, income and affordability checks.
A ‘Second Charge Mortgage’ can be useful in the following ways:
- It can be a more cost-effective way of borrowing for sums in excess of £25,000.
- Payment terms can be spread from 3 to 30 years, age, product and eligibility dependent.
- It doesn’t interfere with your original ‘First Charge Mortgage;’ this is great news if you have a particularly good interest rate with your First charge Mortgage’ provider and also if your credit rating isn’t quite as good as it once was. A ‘Re-mortgage’ option could well attract a worse rate of interest on the overall sum of borrowing -especially if your credit rating has slipped since taking out your original mortgage!
- Re-mortgaging can also attract penalty fees depending on your original mortgage product.
- A ‘Second Charge Mortgage’ is generally a quicker alternative to re-mortgaging.
- Can be a more cost-effective way of funding a ‘buy to let’ investment than re-mortgaging.
For further information on ‘Second Charge Mortgages,’ talk to Dunham McCarthy, we can give you independent advice on all your options.