A second charge mortgage, or a secured loan, is the process of using any equity (the percentage of the property you own outright) you have in your home/property as security against another loan. Your home will therefore have two mortgages. Some people use second charge mortgages instead of remortgaging their property.
The amount of equity you have on your home is the maximum amount you can borrow. For example, if your property was worth £230,000 and you have £100,000 left to pay on your mortgage, your equity will be £130,000.
£230,000 - £100,000 = £130,000
(Property value – Mortgage left to pay = Equity)
You may want to consider taking out a second mortgage if:
- You are finding it hard to get another form of loan if you are self-employed, such as a personal loan.
- You are wanting to remortgage but your credit score has reduced since taking out the first mortgage. If you remortgaged in this situation you could end up paying a larger amount of interest on your entire mortgage, where as taking out a second one would only add additional interest to the new loan.
- You want to remortgage but you would face a high early repayment charge. A second mortgage could work out cheaper.
Speak to an adviser before making a decision, as they will try to find you the best method for your individual needs, using years of knowledge and experience. Call us today on 0333 320 8658.
You should avoid taking out a second mortgage if:
- You are already struggling to keep up with mortgage payments. If you already find yourself barely managing to make your first mortgage payments, a second mortgage will not benefit you. You could even end up losing your home if you cannot make repayments.
- You are hoping to use it to pay off smaller debts. Taking out a second mortgage to cover debts of things such as credit cards can lead to paying more interest over time. It also poses the risk of having your property repossessed as you are converting unsecured credit into secured credit.
For additional information, or just general enquiries about your own second charge mortgage, call us at View Finance today on 0333 320 8658 or send us an email at info@viewfinance.co.uk and our advisors will give you all the help that they can to find the best options for you!
