A second charge mortgage of £25,000 payable over 5 years on a fixed rate of 9.50% would require 60 monthly payments of £546.03. The total amount repayable would be £32,761.80, this includes interest and a product fee of £999. The overall cost for comparison is 11.8% APRC representative.
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 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.
Second charge mortgages are a useful source of borrowing for many, 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 a second charge mortgage 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.
Firstly, like all loans, a borrower would be given immediate access to funds. Whereas if you were to begin gradually saving up, it would take you longer to raise the money.
As a lender uses your property as security, you may be able to obtain a larger loan with lower interest rates in comparison to other types of borrowing. For example, with an unsecured loan where assets are not used as collateral, rates and monthly repayments tend to be higher.
The criteria for second charge mortgages tends to be more flexible in comparison to other borrowing options, such as your credit history or your length of employment.
This is because your property is used as security. With this being said, it does depend on your personal circumstances.
With a second charge mortgage you may be able to access longer repayment periods. This means that you will be able to pay back the money over a longer period of time, which will decrease you monthly repayment costs.
It is important to note that having a longer repayment period, will mean that you may end up paying more overall, as you will be paying the interest over the loan term.
Whilst second charge mortgages are a good option for people with a good credit history, they can also be solution for those poor credit profiles.
Although some lenders may not be unable to assist, due to the associated financial risk, we have helped many individuals with poor credit profiles.
We consider all credit histories, including those that have:
Rates vary lender to lender and in most cases your personal circumstances such as your credit score and income will determine the rate and loan term.
Second charge mortgage rate tends to be higher than the rate for your first mortgage, as the second charge lenders usually take more risk.
If you were unable to keep up with your mortgage payments and your property was repossessed, the first charge mortgage lender would be paid before the second charge lender.
Therefore, if there wasn’t enough equity in your home to pay back both lenders, the second charge mortgage lender could lose money
Applying for a second charge mortgage 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.