A second charge mortgage is a mortgage that‘s secured against a property which already has a mortgage on it.
This second mortgage is entirely separate from your original or “first“ mortgage. It‘s a completely different product with a new lender.
You need your existing lender‘s permission in order to secure a second charge on your property.
The rate for your second mortgage will likely be higher than the rate for your first mortgage, as second charge lenders are often taking on more risk; if were you unable to keep up your mortgage payments and your property was repossessed, the first charge lender would be paid before the second charge lender. This means that, if there wasn‘t enough equity in the property to pay back both lenders, the second mortgage lender could lose money.
Who Could Benefit from a Second Charge Mortgage?
You might find a second charge mortgage suitable if you:
- Want to avoid remortgaging because you‘re still on your introductory deal and your mortgage has ERCs (early repayment charges)
- Have a great deal on your current mortgage that you don‘t want to lose by remortgaging
- Don‘t want to extend the term of your current mortgage
- Aren‘t able to get a further advance from your existing lender
- Have found that your credit rating has gone down since taking out your first mortgage
- Are struggling to obtain some form of unsecured borrowing