Second Charge Loans

As with all borrowing there are risks associated with second charge mortgages (or secured loans) and you should only commit to one, once you have taken advice and you are confident you understand what you are committing to.

The biggest risk is that a second charge mortgage is secured against your home. If you stop paying it your home is at risk!

Another risk related to a second charge mortgage is the product term. It may become problematic if it is not correctly tied in with your existing mortgage. This could lead to early repayment charges. It is the job of your adviser to ensure any cross over of expiry dates are coordinated and the right products are selected.

Something else to consider... if you are applying for a second charge mortgage, and have adverse credit, you are more likely to be charged a higher interest rate. This could make the loan expensive.

There are minimum lending amounts applied to second charge mortgages. Many lenders' minimum loan amount is £10,000 but it depends on their lending criteria and sometimes what the loan will be used for.

You can expect to borrow up to 90% LTV on a residential second charge mortgage. But secured loans brought against Buy to Let properties tend to start at 80% loan to value.

Loan to value bandings include your existing mortgage balance. This means that if you have a property worth £500,000 and an existing residential mortgage of £200,000, the maximum you could borrow at 90% loan to value would be... £250,000.

Affordability is assessed broadly in line with standard mortgages. However, some second charge lenders can be more generous.