Second Charge
Mortgage Rates
You could receive your loan in as little as 3 days!
- Borrow up to £250,000
- Flexible terms from 3-30 years
- We consider all credit histories
- Employed, self employed, pension and benefit income
- Direct lender so no broker fees
Representative Example: A secured loan of £31,000 payable over 7 years on a fixed rate of 9.83% for the first 5 years, followed by a variable rate, currently 9.69%, would require 60 monthly payments of £553.17 followed by 24 monthly payments of £552.39. The total amount repayable would be £46,447.56, this includes interest, an arrangement fee of £1,999 and a processing fee of £499. The overall cost for comparison is 13.1% APRC representative.
What is a second charge mortgage?
A second charge mortgage is an additional loan taken out on a property that already has a primary mortgage.
The lender uses the equity in your home as collateral. In the event that the loan cannot be repaid, the house will be repossessed. Because the second charge mortgage sits "behind" your main mortgage, the primary lender is always paid first if the property is repossessed and sold.
Second charge mortgages are often seen as the more appealing option for customers over remortgaging their entire property. This is typically because they can avoid hefty early repayment charges and / or preserve the interest rate on their original mortgage.
A second charge mortgage can be used for a variety of reasons, although they are commonly used to consolidate debts, make home improvements and purchase a buy to let property.
Second charge mortgage rates
The interest rate of a second charge mortgage depends on various different factors, including the amount of money you are looking to borrow, the repayment term and your personal circumstances like your credit history.
Second charge mortgage rates are usually lower than other forms of borrowing such as an unsecured loan, this is because the money is secured against your home.
Most lenders will complete a soft and hard credit search to understand how much you could afford and your financial circumstances. Interest rates are likely to be higher for someone that has bad credit. This is because they are considered more of a risk due to their financial history.
However, as a specialist lender with flexible criteria we can help people with complex financial circumstances.
All applications, whether you have good or bad credit are considered on an individual basis - whatever your credit profile, we will do our best to help you get the secured loan you need.
At Central Trust, we will always give you the best possible interest rate. We will only ever recommend a product that meets your needs and circumstances, to ensure that you can afford to repay each month.
Different types of second charge mortgage rates
Second charge mortgages can have two different types of interest rates, a fixed rate or a variable rate. It’s important to understand how interest rates work and how they can affect you.
The rate you are charged by your mortgage lender will determine how much your monthly repayments will be, which also affects the amount you will pay back overall.
A fixed interest rate means you are charged a fixed amount every month throughout the term the fixed rate period. This means that your monthly repayments are always a set amount, unlike a variable rate.
Because of this, fixed rates are often considered a safer option. It can be useful to know exactly what you are required to pay each month, making budgeting easier.
A secured loan with a variable interest rate means that the rate you receive when taking out the loan is subject to change. The interest rate changes when the Bank of England base rates changes, therefore some months your repayments could cost more than others. Equally, you may end up with a lower rate with a lower monthly repayment.
This does also mean that if interest rates increase you could end up repaying a lot more than you originally budgeted for. If you are unsure about being able to afford increased repayments, or you want the certainty of a fixed repayment amount, a fixed interest rate may be the best option.
How does a second charge mortgage work?
A second charge mortgage is another name for a loan secured against your home. These loans are taken out in addition to your first mortgage, hence “second charge”.
A second charge mortgage is a loan that is secured against the equity in your property. These are often referred to as secured loans or homeowner loans.
The amount you can borrow relies on the available equity that’s in your home. This is what’s left when you subtract what’s outstanding on your mortgage, away from the value of your home.
Your home acts as a form of security for lenders if you are ever unable to keep up with the monthly repayments. This therefore means if you don’t own a property, you are unable to take out this type of loan.
With a second charge mortgage you would essentially be borrowing a second line of money in addition to your current mortgage. Therefore, two loans would be secured against your property.
Are second charge mortgages expensive?
The cost of a second charge mortgage depends on various factors like the interest fee and product/lender fees.
As well as your repayment term, the interest rate you are offered will determine how much your monthly payment will be. This will affect the amount you will pay back overall.
Second charge mortgage rates are usually lower than on other forms of unsecured loan. This is because unsecured loans do not require you to use an asset as security.
Like other types of loans there are fees that come attached. The most common types of fees are arrangement fees (also known as lender fees), broker fees and early repayment fees.
As a direct lender we don’t charge a broker fee, only a lender fee applies. This also means that by going direct with us there are no middle men involved and we can provide you with a lender decision quickly.
What to consider before taking out a second charge mortgage
There are various different factors you should consider when taking out a second charge mortgage.
Taking out a second charge mortgage means that you will be securing your loan to your property. By doing so, you are proving to the lender that you can and will be able to pay them back.
It’s therefore important to understand the risks that are associated with this type of loan. If you fail to make your monthly repayments, the lender has the right to repossess your property. However this is usually the last resort.
Before taking out a second charge mortgage it’s important that you assess your finances. Although your lender will complete affordability checks, you should also ensure that you can afford to make the monthly repayments over the term of the mortgage.
Lenders will still check your affordability regardless of your credit score. They will ask questions about your finances to better understand your circumstances. It’s likely that they will complete a hard and soft credit search at some point of your application. This may influence their decision as to whether or not they can lend you the money.
All lenders have their own criteria so their questions may differ. However most lenders will look at your income, other loans you are currently paying off, the equity in your home and your monthly expenses.
Is a second charge mortgage a good idea?
A second charge mortgage can be used for a variety of reasons, although they are commonly used to consolidate debts, make home improvements and purchase a buy to let property.
Typically, they are used by those with poor credit profiles. This is because the loan is secured against your property, which means there is less risk involved for the lender.
Unsecured loan lenders may not be able to help at all, or the rate may be significantly higher in comparison to a secured loan. Often with an unsecured loan they are unable to help people with poor credit profiles, this is because there is more risk involved as they don't have the security of an asset.
If you are looking to borrow a larger amount of money, a second charge mortgage might be the best option. With a second charge mortgage you can typically borrow more money over a longer term in comparison to an unsecured loan, due to the security of your property.
Why choose Central Trust?
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We are one of the UK's longest established specialist lenders, so you can relax knowing you're dealing with an experienced team.
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We are committed to responsible lending, clear communications and good customer outcomes throughout the borrowing journey.
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What rates do you offer?
The rate you are offered on a second charge mortgage will depend on your personal circumstances such as your credit history, and takes into consideration criteria requirements, loan term, our representative APR etc. Lenders that have stricter criteria and do not accept poor credit will likely have a lower rate than those lenders that accept applicants with poor credit. This is because applicants that have a good credit history are considered ‘less risk’.
How do you calculate your rates?
The rate we offer is based on a range of factors, including your personal circumstances, such as your credit profile, income, and debt-to-income ratio, as well as details of the loan itself, including the amount you borrow and the loan term.
Our Representative APR is displayed at the top of each loan landing page. This provides an indication of the typical cost of borrowing for that product. However, the rate you are offered may be higher or lower, depending on your individual circumstances and the details of your application.
What is the difference between fixed and variable rates?
A fixed interest rate means you are charged a fixed amount every month throughout the term the fixed rate period. After the fixed term is up, you will potentially be able to refinance. A fixed interest rate also means that your monthly repayments won’t change, unlike a variable rate. Fixed rates are often considered a safer option, particularly in times of uncertainty. It can be useful to know exactly what you are required to pay each month, making budgeting easier.
A secured loan with a variable interest rate means that the rate you receive when taking out the loan can change. The interest rate changes when the Bank of England base rates changes, therefore some months your repayments could cost more than others. Equally, you may end up with a lower rate with a lower monthly repayment.
Why take out a second charge mortgage?
Using your home as security could help you borrow more money, get a lower interest rate, or even overcome a poor or bad credit history.
Second charge mortgages are a useful source of borrowing for many people, as they can be used for a variety of different purposes.
They can be used to fund home improvement projects, whether these are essential property repairs or bigger projects with the aim to enhance a property or to increase the property value.
Some people take out second mortgages to help consolidate their debts. It could be that someone has multiple debts that they have accumulated over a longer period of time, and they intend to combine them into one loan with a lower repayment cost. In doing so, it can help people understand their debt better as it helps simplify their monthly payments.
Or they can simply be used to raise funds for other purposes that an individual does not have the savings to cover at the time.
How do I enquire about a second charge mortgage?
Enquire for a second charge mortgage, it is a straightforward process, which can be completed online by following our application process or by calling one of our qualified advisors using the number at the top of this page.
Our advisors will be able to discuss your enquiry and establish whether or not we can help secure the funds you need.
Are second charge mortgages a good idea?
Yes, if you are using it to consolidate debt or pay off other debt at a lower interest rate or with more affordable monthly repayments. Using the equity in your home to reduce your costs or overall debt can be a good idea, but only if you can afford the new repayments as your home will be at risk if you cannot.
Do I need a solicitor for a second charge mortgage?
No. A solicitor will not be required for a second charge mortgage application. However we would always recommend researching any loan thoroughly and making certain that it is comfortably affordable. Always budget responsibly, and ideally have a plan of action in case of financial difficulty.
Can a mortgage company refuse a second charge?
Yes. Your mortgage lender is allowed to refuse a second charge loan or mortgage against your property if they feel it would make them lose money on the sale if they should ever need to repossess it. Generally, this would only happen if you were trying to borrow more money than what was available in equity.
You should always make sure you have enough equity in a property before applying for a second charge mortgage or loan. However if you are unsure, the new lender should be able to check for you. It’s worth noting that a lender could also refuse a second charge on other grounds such as affordability and credit history.
Are second charge mortgages regulated?
Second charge mortgages are regulated by the FCA, however if someone bought an investment property and does not live in it, then it falls into the “non-regulated” category. Second mortgages raised against these types of properties would fall into this category.