Services

Second Charge Mortgage

Second charge mortgages are often referred to as second mortgages because they have secondary priority behind your main (or first charge) mortgage. They are a secured loan, which means they use the borrower’s home as security. Many people use them as a way to raise money instead of remortgaging.

A loan that one or more persons receive in order to buy a house or other residential property in which they will live. The loan is secured by a lien on the property; the borrowers repay it over a specified period of time. The interest on a residential mortgage is tax deductible under most circumstances.

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How does a second mortgage work?

You must be a homeowner to get a second mortgage, although you do not necessarily need to live in the property. A second charge mortgage allows you to use any equity you have in your home as security against another loan. It means you will essentially have two mortgages on your home. Equity is the percentage of your property owned outright by you, which is the value of the home minus any mortgage owed on it. For example, if your home is worth £250,000 and you have £150,000 left to pay on your mortgage, you have £100,000 equity. A second charge mortgage can be a loan of anything from £1,000 upwards. Lenders now have to comply with stricter UK and EU rules governing mortgage advice, affordable lending and dealing with payment difficulties. This means that lenders now have to make the same affordability checks and ‘stress test’ the borrower’s financial circumstances as an applicant for a main or first charge residential mortgage. Borrowers will now have to provide evidence that they can afford to pay back this loan. For more details on what an affordability assessment might involve, and the evidence you may be required to provide to support your second mortgage application

For more information please contact us on 0207 993 4684, alternatively 0207 993 4725