Second charge loans, otherwise known as homeowner loans
What Are Second Charge Loans?
Second charge loans are a secured loan and are also known as second mortgages or homeowner loans.
Taking out a second charge loan will mean you will have two separate mortgages on your home. The second mortgage sits below your main mortgage in terms of priority. The main mortgage will always take priority over the second charge loan.
How Second Charge Loans Work?
A second charge mortgage allows you to use any equity you have in your home as security against another loan. Equity is the percentage of your property owned outright by you, which is the value of your home minus any mortgage owed on it.
A second charge loan works in a similar way to your primary mortgage. For example, when you sell a property on which you have a mortgage, you will have to pay off that mortgage using the money from the sale. Similarly, you will also have to pay off any second charge loan that is secured against that property.
Why Choose a Second Charge Loan?
They are often used as an alternative to a re-mortgage especially if you are on a fixed rate mortgage with early repayment charges or if you have an interest only mortgage.
Here are some reasons why a second charge loan may be preferable to re-mortgaging:
- If your credit score has reduced since taking out your first mortgage.
- You may have had a change in circumstances which could mean you end up paying a higher interest rate on your entire mortgage.
- It may be cheaper for you to take out a second charge mortgage rather than to remortgage.
Check your current mortgage deal to see if this has any exit fees or high early repayment charges.
What can second Charge Loans be used for?
This type of loan can be used for home improvement or to consolidate other existing debt or if you are planning a wedding.
With our second charge loans you may be able to borrow from £5,000 to £100,000. The higher the equity in your property, the more money you may be able to borrow. A second charge loan allows you to raise the money you want, when you want and without you having to change mortgage lender through a remortgage.
With our second charge loans there is a mandatory reflection period of 7 days between receiving your Binding Mortgage Offer and signing the Legal Charge document. This gives you time to consider your loan option.
Representative 22.93% APRC variable.
For a typical loan of £26,600 over 180 months with a variable interest rate of 19.56% per annum, your monthly repayments would be £484.00. This includes a Product Fee of £2,660.00 (10% of the loan amount) and a Lending Fee* of £763.00, bringing the total repayable amount to £87,030.00. Annual Interest Rates range between 11.7% to 46.5% (variable). Maximum 50.00% APRC. *Lending Fee varies by country: England & Wales £763, Scotland £1,051, Northern Ireland: £1,736.
Think carefully before securing debts against your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
