When it comes to personal finances, loans, and property, there are so many terms to learn and understand.
Whether you’re trying to make sense of APR, soft searches, or repayment holidays, too much jargon can leave you feeling perplexed—and this is where we can help.
If you’ve heard the phrase “second charge mortgage” and need to know what it means, you’ve come to the right place.
In this guide, we’ll talk you through everything you need to know about second charge mortgages, so that you can make informed personal finance decisions with confidence.
What is a second charge mortgage?
A second charge mortgage is a loan that is secured against your property, on top of your existing mortgage.
They are most commonly referred to as secured loans, or homeowner loans.
At this point, you might be asking yourself why it’s referred to as a mortgage, when it’s actually a loan. Allow us to elaborate.
Why is it called a second charge mortgage?
When you buy a property, you typically can’t afford to pay the full value in cash, so you apply for a special type of loan called a mortgage. These high-value loans are secured against the property they pay for, and are paid-off over a long-term schedule.
This mortgage is the first legal charge you are making against the property, which is why it’s sometimes referred to as a first charge mortgage.
Therefore, when you take out an additional secured loan on your property, it’s called a second charge mortgage as it’s the second legal charge (or debt) against it.
How do second charge mortgages work?
When you take out a second charge mortgage—or a secured homeowner loan, as they’re more commonly known—you are securing the loan debt against your property.
This means that lenders have additional security, meaning they don’t need to rely so heavily on your credit score, income, and borrowing history to evaluate your eligibility. They will also typically offer higher amounts, over longer loan terms, which can result in lower monthly repayments for the borrower.
Having said that, it’s important to remember that this debt is secured against your property as collateral.
Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Is a second charge mortgage the same as remortgaging?
While they may sound similar, remortgaging and second charge mortgages are not the same thing.
Remortgaging is the process of replacing your mortgage with a new one, whereas a second charge mortgage is an additional payment on top of your existing mortgage payments.
You might choose to remortgage if you have come to the end of a beneficial fixed rate introductory period, or simply think you can find a more suitable mortgage elsewhere.
If you remortgage to release equity during a fixed rate period, you may have to pay a big early repayment fee. A second charge mortgage, on the other hand, allows you to borrow more money against your home without breaking your current mortgage contract.
Advantages of second charge mortgages
- Borrow higher amounts than you would be able to with an unsecured loan—our lenders offer secured loan amounts ranging from £5,000 to £2,000,000
- Borrow over a longer period, with loan terms of 1 to 30 years
- You can receive advice from a qualified adviser on the best product for you, as it is a type of mortgage
Disadvantages of second charge mortgages
- You can only get a secured loan if you own your home
- The loan is secured against your home, meaning you have to be sure you can afford the repayments every month—both now and in the future
- Your home may be repossessed if you do not keep up the repayments on a mortgage or any other debt secured on it
- You can face early repayment charges and administrative costs if you want to pay off the loan early
Can I get a second charge mortgage?
In order to be eligible for a second charge mortgage, you will need to be a homeowner.
Your eligibility to be approved for a secured loan, or second charge mortgage, will largely come down to the value of your property and whether it is suitable, in comparison to the amount you are looking to borrow.
Lenders will likely review other factors like your income, your debt-to-income ratio (how much existing debt you pay for each month), and your credit history.
The quickest way to check whether you are eligible for a second charge mortgage is to use our free eligibility check tool.
How to put a second charge on a property
To start the application process for a second charge mortgage, your first step will be to find and decide on a lender.
To help with this, you can use our free tool to check your eligibility. Simply enter a few details about yourself and your borrowing needs, and we will perform a soft search to identify suitable lenders for your circumstances.
You can then compare lenders and, if you find one that is right for your needs, proceed to make an application for a secured loan—or second charge mortgage.
At this point, the lender will run a hard check on your credit file, meaning the check will appear on your credit report for others to see, and consider this alongside the information you have provided about your property.
If the lender approves your application, they come back to you with an offer that you can then review and decide whether it is affordable.
As a secured loan is classed as a form of mortgage, you will have access to an adviser during this process, with whom you can discuss your options in more detail.
Once you agree to the terms of the loan and provide the necessary paperwork regarding your property, you will enter the agreement and receive the funds. You will then be required to repay these funds according to the agreed repayment schedule.
Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Alternatives to second charge mortgages
While a second charge mortgage—or secured loan—is the primary focus of this guide, it isn’t the only form of borrowing available to you.
Unsecured loan
An unsecured loan, also known as a personal loan, is a form of borrowing where the debt is not secured against any other assets you own. Instead, the lender relies on your credit score and other signals to determine whether you are a reliable borrower.
Unsecured loans are smaller than their secured counterparts, and have shorter terms. So they are only worth considering if you are looking to borrow loan amounts under £50,000.
Credit card
Credit cards can be a great alternative to a loan if you only need to borrow a comparatively small amount at a time, and want the flexibility to use it when you need to.
Credit cards generally have lower overall credit limits (the total amount you can borrow) than you might get with a loan, but they come with the benefit of flexible monthly repayments. You simply need to make a minimum repayment, which is often fairly low, and can decide whether you want to pay off more of the debt at a point that suits you.
However, if you are looking to borrow a large amount, then a second charge mortgage (secured loan) might be a more suitable option.
Is a second charge mortgage a good idea?
It’s ultimately up to you to decide whether a second charge mortgage is a good idea, depending on your needs and preferences.
To help you make a decision, here is a summary of everything we’ve covered in this guide:
| What is a second charge mortgage? | A second charge mortgage is a loan that is secured against your home, often referred to as a secured loan |
| Advantages |
|
| Disadvantages |
|
| Borrowing amount | £5,000 to £2,000,000 |
| Borrowing term | 1 to 30 years |
| How to apply | Head to our free eligibility checker to start comparing lenders |
Find a second charge mortgage
Are you ready to start comparing lenders and find the ideal second charge mortgage to fund your next purchase?
Head to our eligibility checker to start your search—it’s quick, easy, and obligation-free.
