January 4th, 2024.

What Is a Second Charge Mortgage Loan?

To put it simply, a second charge mortgage loan, also referred to as a second mortgage, is a type of subordinate mortgage made while the first (original) mortgage is still in effect. The first mortgage is the original loan used to purchase your home, and the second charge mortgage is an additional loan taken out against the same property. The amount you can borrow with a second charge mortgage is determined by the equity in your property.

A second mortgage is given from a source other than the original lender, and will take second priority to the first lender. What does this mean? Well, if the property is sold in the future, the first lender will have first call on equity in the property. As with any mortgage secured on your property, failing to repay it could mean you’ll lose your property.

Why Take Out a Second Charge Mortgage?

Second charge mortgages are taken out in order to gain access to additional funds, and while they often have higher interest rates than first mortgages, the interest rates are lower than taking out a credit card or personal loan.

Reasons to take out a second charge mortgage might include:

Finance large expenses – A second charge mortgage can be used to finance significant costs, such as university, a wedding, or starting a business.
Home improvements – Many homeowners use second charge mortgages to fund home renovations or improvements, which will in turn increase the value of the home.
To raise funds to pay your tax bill if you’re self-employed (we’ll look at this further down the blog).
High early repayment charges – If your current mortgage has a high early repayment charge, it might work out cheaper if you take out a second charge mortgage rather than to remortgage to release equity from your property.

The suitability of these reasons will of course depend on your personal circumstances.

If you’ve had no luck with remortgaging or acquiring a further advance, a second charge loan from Pure Property Finance might be the solution you’re looking for. Request a callback with a member of our team to find out more.

Key Features of a Second Charge Mortgage Loan:

Low rates starting from 2.9%
Residential, Buy to Let & Commercial property accepted
Deals can be turned around in 2 weeks
Independent from existing mortgage
Loan To Value (LTV) up to 100%

Discover more key features here.

Second Charge Mortgages vs Remortgaging

The difference between second charge mortgages and remortgaging is simple – a second charge mortgage is a completely new, separate mortgage, allowing you to keep your existing mortgage, whereas remortgaging involves switching your existing mortgage to a new deal, either with your current lender or a different lender, and potentially negotiating terms.

Choosing between a second charge mortgage and remortgaging depends on a few different factors such as the existing mortgage terms, the purpose of borrowing, the amount needed, and the borrower’s overall financial situation.

Typically speaking, second charge mortgages are quicker to obtain than remortgaging and a great option if you have adverse credit and need to borrow.

If you’re unsure whether a remortgage or second charge mortgage is right for you, get in touch with a member of our expert mortgage team and we can assess the most suitable option based on your individual circumstances.

How Can Second Charge Mortgages Be Used for Tax Liabilities?

It’s the start of a new year which, unfortunately, marks the start of tax return season. All sorts of taxpayers across the UK, from the self-employed business owners to those with varied income arrangements, will need to not only submit a tax return to HM Revenue & Customs, but pay it too.

Some taxpayers will save money throughout the tax year so that when the dreaded January arrives, they have the cash they owe ready at their disposal.

Others, however, might not be able to do this throughout the year so they’ll need to raise funds for their tax bill differently. This is where their property can come in.

Tapping Into Equity

While remortgaging is an option for some if they’re coming to the end of their existing fixed or variable deal, that won’t always be the best option for borrowers at a different stage of their mortgage.

This is because, If they are, for example, three years into a five-year fixed rate, the early repayment charge involved may be huge, let alone the likelihood that they will be moving to a more costly interest rate.

That’s where second charge mortgages come into the situation. This form of property loan allows the homeowner to raise money against the property, without having to touch the original mortgage at all.

With a second charge mortgage, there are no significant early repayment charges to worry about and no impact on the current interest rate.

How We Can Help

At Pure Property Finance, our experienced finance brokers have built up strong relationships with lenders, meaning we have the knowledge to match you up with the lender that best suits your financial needs.

We’re known for our expertise in arranging property finance deals, plus, we’ve access to broker-only deals which aren’t available on the high-street.

So, if you’re looking for a secured loan against your main residence, buy-to-let properties or commercial buildings in second charge behind your main mortgage, we can help!