Second charge mortgages are often called second mortgages as they have second priority behind your first mortgage. This loan uses the equity in your home as security.
There are several reasons why a second charge mortgage might be worth considering:
- If you’re struggling to get approved for a secure or unsecured personal loan. Perhaps because you’re self-employed.
- If your credit rating has declined since borrowing your first mortgage, remortgaging could mean you end up paying more interest on your entire mortgage balance, rather than just on the increase or extra amount you need to borrow.
- If your mortgage has a high penalty to break mid-term, it might be a cheaper option for you to take out a second mortgage.
Second mortgages usually have higher interest rates as they come with higher risks to the lender. Although a second mortgage can prove to be very useful when you need a lot of cash quickly, be aware like any other loan taken against an asset, it puts that asset at risk. If you are unable to keep up with your payment obligations, the lender will have to resort to foreclosure and you could end up losing your home. It is important to fully understand your repayment capability before you take out a second mortgage.