Second Charge Mortgages: An Alternative to Remortgaging
A second charge mortgage is a secured loan taken out against your property in addition to your existing mortgage. It sits behind your first mortgage in priority order, which is why it is called a second charge. It can be a cost-effective way to raise capital without disturbing a competitive existing deal.
When a Second Charge Makes Sense
If you are on a low fixed rate with a large Early Repayment Charge, remortgaging to raise funds could be expensive. A second charge lets you keep your existing deal intact while still accessing the equity in your property. It is commonly used for home improvements, debt consolidation, or funding a business.
How Much Can You Borrow?
The amount available depends on the equity in your property (the difference between its value and your outstanding mortgage balance) and your income. Most lenders will lend up to 85–90% of the property value across both charges combined.
Rates and Terms
Second charge rates are higher than first charge mortgage rates, reflecting the increased risk to the lender. Terms typically range from 5 to 25 years. Your broker will compare the total cost of a second charge against remortgaging (including any ERCs) to identify the most cost-effective option.
Regulation
Second charge mortgages on residential properties are regulated by the Financial Conduct Authority (FCA) in the same way as first charge mortgages. This means you benefit from the same consumer protections, including the right to a Key Facts Illustration before you commit.
Want to raise capital without touching your existing mortgage? Speak to our team to find out whether a second charge is right for you.