A second charge mortgage may be a good borrowing option if your customer owns their property and has enough equity in it. They can be used to fund most purposes but are typically used for large home improvement projects or debt consolidation.

Situations to consider a second charge mortgage

Here are three situations where a second charge mortgage could be a good alternative to re-mortgaging or taking out an unsecured personal loan.

  1. Your customer doesn’t want to lose the terms of their current first charge mortgage. This could be for several reasons such as:
    1. They’ve got a low, fixed-rate that they don’t want to lose
    2. They would have to pay a high early repayment charge or a penalty fee to switch mortgage or re-mortgage
    3. They’ve got an interest-only mortgage that they may lose if they re-mortgage
    4. Their existing mortgage lenders criteria won’t let them borrow any more
  2. If they’re looking to borrow a significant amount, typically more than £25,000. Depending on the equity they have in their home a second charge mortgage may let them borrow more and at a lower interest rate than an unsecured personal loan.
  3. When they need the funds quickly. Depending on their circumstances a second charge mortgage may be a faster way of your customer getting access to funds than a traditional re-mortgage.

This content is designed for an intermediary/broker audience.

If you’re a direct customer, it’s a good idea to get advice from a qualified advisor before taking out a second charge mortgage to make sure it is the best option for you. They are secured against your home, so your home could be at risk if you default on the payments.

They are also often taken out over a longer period than an unsecured loan. This means that although the interest rate may be lower you could end up paying more over the duration of the loan.

You can check out our article on second charge mortgages explained for more information.