Second Charge Mortgages
If you have unreleased equity in a property which you currently have a mortgage on and you are looking to raise some capital, then a second charge mortgage might be for you. Second charge mortgages (or just second mortgages as they are sometimes known) are quite simply a loan secured against a property which already has a pre-existing mortgage. The pre-existing mortgage is a “first charge mortgage” and if you choose to take out a second charge mortgage it will be with a completely different lender and the term of the second charge mortgage will likely be completely different to the terms on the first charge (ie the rate, any fixed term and the overall all term of the mortgage will all likely be different to the first charge mortgage).
When looking at second charge mortgages you need to be very careful not to confuse them with a “further advance”. A further advance allows a borrower to secure additional funding from their current first charge lender. But when you take out a second charge mortgage it will be with a new lender and the rate will likely be higher. This is because the risk profile for the lender is slightly higher than with a first charge as the first charge lender gets priority of funds should a property ever be repossessed.
As a responsible broker, here are The Friendly Mortgage Co. we will always explore all of your options before recommending a second charge mortgage. It might be that remortgaging to a new lender is actually the best value option, or possibly taking out a further advance with your current lender is the best route. However, these options are not always available and are not always cost effective in which case a second charge mortgage could be exactly what you are looking for. We will go over all of your options with you and explain the pro’s and con’s of each avenue of funding so that you can make an informed decision about what is best for your circumstances.
Feel free to drop us a call and one of the tram with more than happy help.