Second Charge Mortgages

A second charge mortgage is a type of loan that allows a homeowner to borrow money against the equity they have in their property. The key difference between a second charge mortgage and a regular mortgage is that a second charge mortgage is secured against the borrower's property in addition to their existing mortgage. This means that the lender has a second legal charge on the property if the borrower defaults on their repayments.

Second charge mortgages are typically used for home improvements, debt consolidation or other major expenses, whereas regular mortgages are used to purchase a property or refinance an existing mortgage. The interest rates and repayment terms for 2^nd charge mortgages are usually higher than those for regular mortgages due to the increased risk to the lender.

To qualify for a second charge mortgage, you need to have a property with sufficient equity to secure the loan, which means that the property's value should be greater than the loan amount. Also, having a stable income and a good credit score is generally required to demonstrate that you can afford to repay the loan. However, if you have a low credit score, you may still be eligible for a second charge mortgage as ams: works with lenders who are likely to be able to assist you. Why not speak to one of our team today? If we can’t help it’s not possible.

The maximum amount that can be borrowed with a second charge mortgage is subject to the borrower's situation and the policies of the lender. The loan amount offered is typically based on the borrower's equity in the property and their capacity to repay the loan. Normally, lenders may provide a second charge mortgage for up to 85% of the property's value. However, the loan amount may vary among lenders based on different aspects such as the borrower's credit score, income, and the intended use of the funds.

There are various reasons why individuals may choose to take out a second charge mortgage. Here are some of the most popular reasons:

• Buy-to-let property purchase - second charge mortgages can also be used to purchase a buy-to-let property, which can provide an additional source of income
• Debt consolidation - individuals may choose to take out a second charge mortgage to consolidate their debts, such as credit cards, personal loans, or other outstanding debts, into one more manageable monthly payment
• Education expenses - some individuals may require funding for education expenses, such as private tuition fees, university fees or living expenses, for themselves or their dependents
• Funding for a second home - homeowners may wish to buy a second property, such as a holiday home that they can visit at weekends or in holiday periods
• Home improvements - many homeowners opt for a second charge mortgage to fund home renovations or extensions, which can add value to their property
• Investment opportunities - sometimes homeowners may have access to an exciting investment such as shares, a business opportunity, commodities, etc. and may use equity to finance the investment!
• Purchase of a vehicle - funding a new car or other vehicle through this type of mortgage can be much cheaper than through car finance
• Unexpected expenses - these can include medical bills, emergency home repairs, funeral bills, etc.
• Wedding expenses - funding a wedding is often beyond cashflow in the bank and homeowners can use a second charge mortgage to fund the wedding (and possibly also the honeymoon). Sometimes this can be used also to fund the weddings of children too

Whatever your recent for needing a second charge mortgage, why not contact our experts at ams: We can help secure new finance at competitive rates and obtain your mortgage offer quickly and smoothly. If we can’t help, then it’s not possible!

Second charge mortgages generally have higher interest rates compared to regular mortgages due to the greater risk involved for the lender. The lender considers these mortgages riskier because they are secondary to the primary mortgage, and the lender may have to wait longer to recover their funds in case of default.

Moreover, 2nd charge mortgages often come with shorter repayment terms and smaller loan amounts, making them less attractive to lenders. The interest rates for these mortgages may vary depending on factors such as the borrower's credit history, income, loan amount, and the lender's policies.

While paying a higher interest rate is usually the norm, at ams: we are likely to be able to assist with additional mortgage finance at highly competitive rates. Why not put us to the test? Speak to one of our team, if we can’t help it’s not possible.

It is possible to sell your property even if you have a second charge mortgage. However, before transferring ownership to the buyer, you will need to use the sale proceeds to pay off the outstanding balances of both your first and second charge mortgages.

After paying off the first charge mortgage, estate agent fees, and other selling costs, the amount you owe on your second charge mortgage will be deducted from the sale proceeds. If the sale proceeds are not enough to cover the outstanding balance of the second charge mortgage, you will need to make up the shortfall with your own funds.