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TLP Guide

The benefits of a second charge mortgage

  • Read time: 4 mins

So you are considering a second charge mortgage and are wondering whether it really is the right solution to get the additional funds you need.

We get that there are so many options and things to consider, we understand that you’ll want to look at it from all angles and ensure it is the right path for you. So here’s not only the benefits of choosing a second charge mortgage, as opposed to remortgaging or getting a personal loan, but also some things you should consider before applying.

Family in kitchen researching mortgages on The Loan Partnership

What is a second charge mortgage?

Essentially, a second charge mortgage is an additional loan, on top of your existing mortgage,  that is secured against your property (whether that is your residential home or even a buy-to-let).

The amount of loan that you can borrow with a second charge mortgage will depend on the equity that you have built up on the property, which is why it can sometimes be referred to as a ‘homeowner loan’. Put another way, you can work out the amount you may be able to borrow by deducting the outstanding balance on your original mortgage from the value of your property.

So what are the advantages of a second charge mortgage?

Lots of homeowners and landlords take out second charge mortgages for a plethora of reasons, and some of the benefits include:

  • If you would like to borrow some extra cash using your property but you already have a very affordable interest rate on your existing mortgage that you don’t want to lose, by taking out a second charge loan you can keep the original mortgage and only pay the new interest rate on the new loan. Comparing this, if you were to remortgage instead, it would mean you would have to pay the higher interest rate across the whole borrowing amount. 
  • On top of this, by taking a second mortgage, you may be able avoid paying early repayment charges (ERCs) on your current mortgage, potentially saving you thousands of pounds.
  • The process of securing a second charge mortgage can be much quicker and straightforward compared to the process of remortgaging your home, meaning you get the cash you need faster and easier.
  • As a second charge mortgage is secured against your property, you may be able to borrow more than you could with a traditional personal loan.
  • Additionally, if you are struggling to get a personal loan, due to complex income, bad credit or being self-employed for example, then a second charge mortgage may be easier to get as your property is used to secure the loan. It can provide a financial lifeline when looking to consolidate any existing debt or raise extra funds.
  • The repayment period can be longer compared to other finance options, making the payments more manageable. The total amount repayable overall will be higher but the longer the term, the lower the monthly payments. This makes it a great option for debt consolidation and large purchases.
  • Second charge mortgages can give you greater flexibility on what you use the loan for, for the most part, you can use the second charge mortgage for any legal purpose. Most commonly people use them to reduce monthly outgoings into a single more affordable payment, or to purchase large items like a new car or a new property. We’ve helped hundreds of homeowners to get the funds they needed in countless situations.

What should you consider before taking out a second charge mortgage?

Like with all loans, there are also some things you should consider before taking on any additional debt. When it comes to a second charge mortgage, you could know that:

  • You will need permission from your existing mortgage lender to secure the second charge mortgage.
  • Like with all mortgages, should you ever fail to meet the repayments on your second mortgage, your property will be at risk so you will need to ensure you can pay both mortgages back.

This is where we come in. Should you have any questions or queries of whether you can take out a second charge mortgage or if it is a suitable option for you and your family, we’re here to help. Our advisors are experts when it comes to second charge mortgages, and they can discuss all of the pros and cons, which mortgage lenders you should consider and exactly how much you can borrow on your property.

We’ll ask you a few questions to understand your full situation and then we can send you a free no obligation quote for you to consider and discuss with your family. We understand that taking out any loan needs to be the right decision, so we’ll help with any queries you may have to ensure you are fully happy with your new mortgage. 

To discover your options and discuss the latest rates available, talk to us on 01923 250090 or get in touch today to get started online.