A first charge mortgage is usually the “main” mortgage that you have on your home.
Sometimes, you may need extra money and there are various ways to raise that capital – one of those ways is by way of a second charge – in simple terms - a second “mini” mortgage on top of the first “main” mortgage.
A second charge mortgage typically has a higher interest rate than a traditional mortgage and the lender will use the property as their security. A second charge mortgage can be used for many reasons; however, the most common reasons are:
Not wanting to leave your current deal early and pay the early repayment charge to access additional borrowing by getting a new “main” mortgage;
not wanting to pay a higher rate for the entire mortgage loan amount;
possibility of not meeting the affordability criteria for the new total loan amount;
adverse credit issues that have arisen since you took the original “main” mortgage loan.
A second charge mortgage also gives you a degree of flexibility and options as then you do not have to wait until you are due to remortgage, e.g. when your discounted rate period ends (i.e when your early repayment charge no longer applies).
If you are considering your options for raising additional funds, there are many different options available and each option will have advantages and disadvantages. In some circumstances a second charge loan may be the best option for you – but not necessarily always. It is therefore vital that you speak to your mortgage advisor so you can get the correct help and advice and make the right decision for your personal set of financial and other circumstances.
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The information provided in this article is not intended to constitute professional advice and you should take full and comprehensive legal, accountancy or financial advice as appropriate on your individual circumstances by a fully qualified Solicitor, Accountant or Financial Advisor/Mortgage Broker before you embark on any course of action.