Second Charge

Why not just remortgage?

With a remortgage, you switch your existing mortgage to a new one with either the same lender or a new one. This lets you take advantage of lower rates, more flexible terms and the ability to release some of the equity tied up in your home. Remortgaging is a popular option although there are some instances when a second charge mortgage can be more beneficial:

• You may have a very good deal for your existing mortgage. You may benefit from a very competitive or discounted rate with your current mortgage but if you remortgage to access some of your equity, you stand to lose that and risk paying a much higher rate. Your mortgage term may also be extended, meaning it will take even longer for you to own your property outright.
• You may be liable for an early repayment charge. Your lender may penalise you for switching to a new mortgage deal. Early repayment charges can be very high so you need to check this with your lender before making a decision.
• Your credit rating may have gone down. Since you took out your original mortgage, your circumstances may have changed and you now have a lower credit rating. Your lender will view this as more of a risk and charge you a higher interest rate if you remortgage. Likewise, if your employment status has changed since you applied for your mortgage, such as becoming self-employed, your lender will view that as an increased risk and insist on charging a higher rate.

When faced with any of these issues, a second charge mortgage can make more sense. As it is completely separate from your first mortgage, the higher interest rate is only payable on the loan amount for the second mortgage.

Our mortgage brokers, located throughout Kent, London and Edinburgh, can check the details of your existing mortgage and find out what alternative deals are available from your lender. If your credit rating is still good, you’re not liable for an early repayment charge and your lender can offer a competitive deal, our expert brokers can handle the remortgage process for you. If, on the other hand, a second charge mortgage is better suited to your circumstances, they can search the market for the best deal available and secure it quickly for you. To discuss the various options at your disposal, get in touch with one of our mortgage specialists on 01322 907 000. Alternatively, send an email to us at info@trinityfinance.co.uk or an enquiry via our contact form and we will reply to you as quickly as possible.   

The need for a second charge mortgage

A second charge mortgage lets you unlock the potential in your home by way of borrowing a sum of money based on its equity. You may wish to carry out some home improvements, go on the holiday of a lifetime, buy a holiday home, invest more money in your business or pay for a special event, such as a wedding. No matter what your reasons for borrowing these funds, a second charge mortgage provides an alternative to remortgaging or using unsecured lending, such as a personal loan.

We’ve mentioned the reasons for choosing this route over remortgaging but there are benefits over unsecured finance too. An unsecured loan, whilst not putting your property at risk, is likely to cost you more with higher rates. This type of funding can also be harder to get if you have a bad credit rating or are self-employed.

How much can you borrow?

As mentioned above, the amount you can borrow is based on the equity available in your property. For example, if your property is valued at £250,000 and you still owe £150,000 for the mortgage loan, you have £100,000 equity. This is the figure the lender will use as collateral. The lender will also factor in your income as well as your credit history and any other loan commitments when determining how much they’re prepared to lend you. Many cap the amount you can borrow to a percentage of the equity held in your property, such as 75% or 80%.

The lender needs to see proof that you can comfortably afford the repayments on top of those for your first mortgage with a buffer to cover your normal living expenses. As with your first mortgage, you will have the option to repay the second charge mortgage over a long term, such as 25 years. As you’re spreading the payments over a long period, this means you can benefit from lower monthly repayments than if you opted for a shorter term.

What happens when you move to another property?

If you wish to move and sell your home, your original mortgage has to be repaid first. When this has been done, your second charge mortgage needs to be repaid unless your lender allows you to transfer it to your new property.