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Second Charge Mortgage(Second Mortgage) – Encash your home equity
A second charge mortgage(second mortgage) is known for its versatility that serves to multiple financial purposes. ShineMortgages works to provide you with the best options. Our panel of lenders has something lucrative to offer. Our online broking services are destined to provide uncompromised borrowing options with easy repayment plans. We open worthy choices to facilitate a vast choice that you can exploit to fulfil financial needs.
What is a Second Charge Mortgage?
The mortgage is a second residential mortgage in which you borrow funds based on the equity you own on an existing home. It is like an additional mortgage on the current property. You can borrow up to the maximum limit of the equity you own on the house. This fact makes it a secured loan quite similar to the first mortgage but different only on one part because this mortgage uses the equity as security.
How does a second charge mortgage work?
A second charge mortgage lets you borrow money on the percentage of the property you own. This percentage is the sum that comes after deducting the mortgage amount from the total property value. An example here can explain better how a second mortgage works.
The current worth of your house is £300,000, and the mortgage left on it is £1,50,000
Your equity will be mortgage amount subtracted from house value
£1, 50,000 - £300,000 = £1, 50,000
Purposes of the second mortgage
The second charge mortgage solves varied financial purposes, and they all can be different. From a small need to a high requirement, all can be encapsulated in the funds borrowed through this scheme. Some common purposes of taking the second mortgage are –
- If you fail to qualify for a short-term unsecured loan such as a personal loan, small business loan etc. you can rely on this option.
- You are looking for a cheaper alternative to remortgage to squeeze down your monthly and total cost of the current mortgage.
- Due to poor credit situation, you have a derailed income-outgoing ratio, and remortgage may prove expensive.
- You want to use your current mortgage for second home buying, may be to pay the deposit and cover the other related costs.
- Some other purposes can be debt consolidation, medical expenses, home improvement and other costs of small of big size.
Quick facts
- Stamp duty charges applicable on a second charge mortgage are 2% to 12% of the property price
- The second charge mortgage process takes around 3 to 4 weeks to complete.
- You can borrow a minimum £1000 and maximum is decided according to equity you own.
- It is possible to get a second charge on a buy-to-let property
- Second charge mortgage is different from a second home mortgage
Tips to get a second charge mortgage
As we always advise you for faster access to funds, here are some tips from our side that can help you get approval on your second mortgage –
- Put control on your expenses and follow the same for six months before you apply for the mortgage.
- Compare the available mortgage deals and always pick the one that you think you can afford.
- Always provide the complete documents; incomplete mortgage applications easily attract rejection.
- Apply to only one lender at a time because multiple applications cause multiple search footprints.
Pros and Cons of second charge mortgage
Shine Mortgages is known for its unbiased and transparent broking services, and we take it as our duty to inform you about the advantages and disadvantages of mortgage products. Here is an insight into the good and the bad aspects of second charge mortgage.
| SECOND CHARGE MORTGAGE | |
|---|---|
| Pros | Cons |
| It is not included in the current mortgage, and you pay interest only on the amount you borrow. | Paying for two separate mortgages is a big challenge and can adversely affect your financial balance. |
| You can fulfil multiple financial purposes through the second charge mortgage. From a personal loan need to a wedding gift, it can replace everything. | The affordability check for the second charge mortgage is always tricky. You may get rejected, and it can cause degrade in credit score. |
| Cheaper than a secured loan and also great support for the borrowers of bad credit mortgages as for them remortgaging is more expensive due to higher rates. | The second mortgage may bring your home under threat because in case you lose control over the monthly instalments. |
Second charge mortgages Vs Remortgages
The second charge mortgages are always considered as one of the best alternatives to remortgages. We want that you should have precise reasons to believe that. Here is an informative comparison.
| Second charge mortgage | Remortgage |
|---|---|
| You get an additional amount on the equity of your current home. | You do not get any additional amount, but the interest rate and repayment plans change. |
| You get funds up to the maximum limit of equity owned on the house. | Remortgaging applies to the complete mortgage deal. |
| You pay interest only on the additional money borrowed from the lender. | It changes the total cost of the complete mortgage deal. |
Every mortgage product has specified purposes to solve. The conditions where the second charge mortgage is more applicable, it becomes irreplaceable. It is getting popularity day-by-day in the mortgage market of the UK as people find the second mortgage as a saviour during their tough times.
Shine Mortgages commits to select more straightforward deals for you that are easy to afford. All our lenders have a high approval rate and speedy application process. We guide you throughout the procedure and take care of the complete documentation part. Also, our team of experts suggest the best ideas to make necessary improvement in personal finances for a smoother approval on the mortgage application. Contact us any time, any day (even on bank holidays), and we are sure to be there. It is not only a promise but also our commitment towards you.