What is a second charge mortgage? Why are they growing in popularity? When are second charge mortgages more cost-effective than a personal loan, remortgage or further advance?
These are just some of the questions which we are regularly asked. Within this short guide, we aim to address the reasons why a growing number of customers are taking out a second charge mortgage when they need to borrow additional funds.
A second charge mortgage (previously known as a secured loan) is very simply a second loan which is secured against your property when you already have an existing mortgage in place. Traditionally, second charge mortgages were seen as an expensive last chance saloon for customers looking to consolidate large debts. However, in recent years an increasing number of mortgage lenders have tightened their criteria and refused to allow people to borrow more through remortgaging or a further advance. The second charge lenders have spotted an opportunity to better serve these customers by offering to lend them the funds they need at much lower rates than ever seen before.
In April 2016 the Financial Conduct Authority became the regulator over all second charge mortgages, this has resulted in stricter governing over the industry as a whole. The FCA now recommends that Mortgage Advisers should always consider a second charge mortgage when a customer approaches them for a remortgage because the products have become so competitive.
The loan can be used for any legal purpose including:
Here are a few examples of when a second charge may be the best option for you: