Do I Need a Property Valuation for a Second Mortgage?
Lenders will always be keen to carry out a property valuation before offering you a second mortgage. This is to ensure that the property is in line with what you have paid for it and to make sure that the paperwork and previous valuations are accurate. Getting an accurate property valuation before applying for a second mortgage is essential in ensuring the process runs smoothly and underwriting can be undertaken with no problems.
However, this is not the only thing you will need to consider when you are thinking of applying for a second mortgage in the UK.
If you are a property owner you may be able to take out a second charge mortgage. Which will allow you to borrow more money against your house, running alongside your first charge mortgage.
As with all large financial decisions, if you feel unsure about what to do seek the support of a professional and independent financial or mortgage advisor. Taking out a second mortgage for any purpose can be a daunting prospect, but in reality, it is just another way of making your property work for you.
Why do People Take Out Second Mortgages in the UK?
There is no single reason for why people take second mortgages, but there are a number of common uses for these specialised forms of property finance including:
- Funding home improvements
- Paying off and consolidating existing debts
- Paying for a child’s wedding
- Funding a child’s education
- Unlocking capital to invest in a business
Before taking out a second mortgage for any reason, including any of the above, always make sure that you will be able to afford the repayments.
It is also important to always remember that should you default on your loan and should you become unable to make your required repayments, much like any other secured loan, you may find your property repossessed.
How Will a Second Mortgage Work for Me?
A second mortgage stands completely separately from your original, first charge mortgage. However, as the title suggests, you will have two mortgages running concurrently and you will need to pay them both off, making repayments for both first and second charge products each month. Remember that if you become unable to repay your first or second mortgage your home could be repossessed.
In the UK, a second charge mortgage is loan secured against a property, which uses the paid off capital in your home as collateral [your owned equity]. This means that your second mortgage will be based on the difference between the value of your property and the amount you still owe on your first mortgage.
Getting a Mortgage Valuation for a Second Mortgage
When you apply for a second mortgage, your lender may wish to carry out a mortgage valuation on a property you already own. This ensures that both parties agree how much the property is worth and at the evaluation in the paperwork is correct. As a property owner, mortgage valuation can let you know whether you are paying too much or too little for your property.
How mortgage valuations are carried out is not up to you, but as chosen by your lender. There are a number of methods that the lender can use including the traditional valuation using a surveyor or using online sales data to assess the value of your property. The cost of a mortgage valuation is usually based on the price of the property but can range between £150 and £1,500. Some lenders may offer the service for free, although often this cost is footed by the owner.
What Happens After a Valuation for a Second Mortgage?
After a mortgage valuation, the surveyor will give their opinion on the value of the property and pass that information on to your mortgage lender. If the two agree on a remortgaging price, the lender will then offer you the money you have asked them to loan you.
However, if the surveyor says the property price is higher than it is worth and this is what is called a ‘down valuation.' A down valuation can mean the lender rethinks the mortgage offer, this will halt the process of remortgaging and the lender will need to reissue an offer and start the process again.