Second charge or second mortgages

Getting a second charge mortgage means using a home you already own as a security to get another long-term loan. It’s like having two mortgages on the same property.

Second charge mortgages are sometimes just called ‘second mortgages’, but don’t confuse it with getting another mortgage to buy a different property. A second charge mortgage means two loans, both secured on one property.

You usually get a second charge mortgage with a different lender to the one you have your mortgage with. It often has a higher interest rate than your primary mortgage, because for second charge lenders, it’s a bigger risk. If your home is repossessed, the primary lender gets to recoup their costs and mortgage amount first.

How much can I borrow?

Usually, the maximum you can borrow is equal to the amount of equity you have. Your equity in your home is the value of what you own outright, as opposed to what you’re still paying back on your mortgage. Equity = property value, minus mortgage debt.

The minimum you can borrow is normally around £10,000. You can’t borrow more than 90% of your property’s value.

Remortgage vs second charge mortgage

If you want to raise extra funds, remortgaging (replacing your existing mortgage with a new, lower interest one) can sometimes be a cheaper way to do it. Check with your lender if there’s an early repayment charge to pay before you decide what to do. You can also talk to your mortgage broker if you’re not sure.

High interest loan vs second charge mortgage

If you only need to borrow a small amount, you’ll almost certainly be better off going for a personal loan or credit card with a higher interest rate, but over a shorter time.

Imagine you want to borrow £5,000:

Second mortgage 5% interest 20 year term £3,000 total interest
Credit card or loan l5% interest 3 year term £1,200 total interest

Either way, it’s a good idea to talk to a broker before you sign on the dotted line.

Thinking about a second mortgage? Our expert brokers can help you decide if it’s right for you. Get started.

Read more articles + guides