When should I consider a second charge mortgage instead of a remortgage?

18/01/2018

Second charge mortgages are not as well-known as remortgages, but can be a better solution in a number of different scenarios. We are here to put you in the picture and explain when a second charge mortgage might be a better option to consider.

Essentially, a second charge mortgage offers flexibility in areas where high street lenders tend to apply blanket rules and tick-box underwriting. This can be frustrating if your application isn’t considered straightforward. 

Here are some examples of where a second charge mortgage may be worth exploring…

You have a low rate, fixed rate or tracker first charge mortgage that you wish to keep
Applying for a remortgage in this situation can result in losing the great rate that you already have. A second charge loan would allow you to keep your original mortgage deal and arrange additional funds separately.

You have Early Repayment Charges attached to your first mortgage

ERCs can be high and could be incurred when settling your initial mortgage agreement. A second charge would mean that these charges could be avoided and allow you to raise funds separately.

You have an interest only mortgage
In the current financial climate very few lenders will consider offering an interest only remortgage. Taking out a second charge loan would enable you to keep your existing interest only mortgage.

Loan purposes
A second charge mortgage can be used to raise funds for a variety of legal purposes. These include home improvements, debt consolidation, paying a tax bill, business expansion, lease extension and paying school fees. High street lenders tend to have less flexibility.

Affordability criteria
Some second charge lenders are able to consider lending up to 6 times your income, whereas remortgage lenders tend to offer up to 4 times your income. In all cases lenders we will carry out a detailed income and expenditure assessment taking into account potential rate increases to try and establish that you are able to afford the loan not only now, but in the future too.

This is just a selection of reasons why a second charge loan may be the best option for you. To look at this in greater detail and talk through the options get in touch with our friendly team to find out more.

As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments. Think carefully before securing other debts against your home.

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