What do you know about second charge mortgages?

Sunday, September 30th, 2018

There still appear to be widespread misconceptions about what a second charge mortgage is, who can have one and how they can be used.

A secured loan by another name.

In years gone by, this type of finance was known as a “secured loan”, but as the mortgage and finance markets have evolved in recent years its formal title of “second charge mortgage” is now more commonly used; mainly because that is exactly what it is.

Not just for debt consolidation.

A second charge mortgage is a loan which is separate from the main or “first mortgage” somebody has against their property and can be used for a variety of purposes.

Although there are many ways the capital raised from a second charge mortgage can be used, in our experience, those who raise capital in this way (using either their residential home or a buy to let investment property as security) most commonly do so for debt consolidation, home improvements, raising capital towards the purchase of a further property or perhaps to provide a deposit for their children to get onto the housing ladder.

Property owners only.

There is then the question of who can access a second charge mortgage. As the title suggests, this type of finance requires security in the form of a second charge against a property, so is only available to property owners. Furthermore, it can only be considered where there is already a mortgage against the property being used. If there is no existing mortgage, then security for the capital raised will take the form of a first charge on the property and the application itself will then be dealt with as a traditional mortgage and not a secured loan.

Why take a second charge mortgage?

So why would somebody would take a second charge mortgage instead of completely remortgaging a property, given the interest rates and fees on a second charge can often be higher than those for a remortgage? In our experience, the most popular reasons for that are:

In summary, there are many circumstances where raising capital via a second charge mortgage may be preferable to a remortgage or further advance and a professional mortgage broker with the knowledge of both markets will be able to provide impartial advice in all the circumstances.

If you would like to know more about how Caboodle Finance of Sutton Coldfield, Birmingham could help, please call our friendly team on 0121 308 9114 or alternatively, just click HERE to email us via the form on our website.

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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. CONSOLIDATING DEBTS MAY INCREASE THE TERM AND TOTAL AMOUNT PAYABLE.

Your initial consultation is free and you are under no obligation to proceed with a mortgage we recommend. There will be a fee for mortgage advice. The exact fee will depend on your circumstances and may be reduced depending on the loan amount and any commission we receive from the lender. It is estimated that the fee will be £595, but it may range from £495 to 1% of the amount you borrow. The fee is only payable on completion and can normally be added to the mortgage. This will be discussed and agreed with you before you make an application. Please ask for a personalised illustration.

Secured loan rates from 3.95% APRC, although we have plans available up to 29.9% APRC which allow us to assist customers with the most severe credit problems. The overall cost for comparison is 7.65% APRC. For secured loans a broker fee up to 10% of the loan amount borrowed may be payable on successful completion. A lender fee may also apply. The actual APRC available will depend on your circumstances. All loans are subject to status. Please ask for a personalised illustration.

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Caboodle Financial Services Ltd, registered in England at SQ2 House, 240b Lichfield Road, Four Oaks, Sutton Coldfield, West Midlands B74 2UD (number 08044670).
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