Second charge mortgages

Second charge mortgages work like standard mortgages in that they are loans secured to either a borrower's residence or investment property, with the difference being that they are registered in addition to the first charge mortgage. For this reason, a second charge mortgage is always with a different lender to the first charge mortgage. At the same time, this means that second charge mortgages are usually offered at higher rates than first charges. Nevertheless, in the right circumstances, they can provide cost-effective funding.

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In addition, second charge mortgages have been regulated by the FCA since 2016- meaning, they represent reliable and established sources of funding for clients who wish to raise capital for a variety of purposes.

Like conventional remortgages, a second charge mortgage may be taken out for a range of reasons: 

1. Raising funds for business investment.

2. Home improvements

3. Debt consolidation 

4. Raising funds for the purchase of Buy-to-Let

5. Transfer of equity 

6. To finance other significant expenditure, such as tuition fees, weddings or luxury purchases.

A second charge mortgage is a more specialist product in the mortgage industry. Since a second charge loan means that the lender is second in priority, it poses a greater risk to them. Therefore, many providers of conventional mortgages do not offer second charge mortgages. For this reason, the experience of a mortgage broker becomes invaluable and should you be interested in taking a second charge mortgage, contact us now.

There are a number of scenarios where a second charge suitable might be the right option for you:

1. If you wish to avoid an early repayment charge which may otherwise occur via a remortgage.

2. If your current mortgage is at a competitive rate and you wish not to lose it by remortgaging it. 

3. If you wish to keep the new mortgage separate from the existing one. 

4. If you have adverse credit and are unable to secure a standard remortgage. 

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However, it is important to note that a holistic approach is required when assessing whether a second charge mortgage is right for you. The same legal obligations apply to secured loans meaning if you default, your property may be repossessed. Hence, it is highly recommended that you seek professional advice and here, at Hilton Finance, we can determine whether second charge mortgages are right for you.