Second Charge Loans

A 2nd charge loan is secured against a residential or investment property. The loan is in addition to your existing Mortgage.

Like a Mortgage, if you don’t keep up with repayments, your home could be at risk. So, make sure the loan is affordable and fits your budget before you commit.

You may have been refused a re-Mortgage or a further advance with your current Mortgage company. This could be due to:

• The nature of the loan. Lenders have restrictions on the use of the funds. Debt consolidation, paying a tax bill or for business purposes are reasons why some Mortgage Lenders will not lend the extra funds you require.
• Your credit history or ability to borrow the extra funds based on your lenders credit or income criteria’s.

Whilst you may find another Mortgage Lender who will lend you what you require – You may be tied to your current Mortgage and don’t want to pay early repayment charges or you might be on a very low rate which you don’t want to give up.

In a similar way to a Mortgage, the lender will take a ‘charge’ over the property as security for the loan. The 2nd charge lender will lend over and above what you have currently secured by the 1st charge (Your Mortgage). It wont effect the terms of your existing Mortgage, but the Mortgage lender will normally need to give consent.

The main difference between the two is the priority of repayment. In the unfortunate event of a property sale due to default, the proceeds will go towards paying off the Mortgage (first charge) lender before addressing any other loans. The 2^nd charge loan is second in priority, making it riskier for the lender.

Like a Mortgage, you will make monthly payments. You can repay the loan early but need to check to see if any penalties will occur.

The total amount you repay depends on the interest rate. The interest rate on a 2nd charge loan is normally higher than that of a Mortgage ‘1st charge’ loan.

• Property value: When you apply for a 2^nd charge loan a valuation will be required. Loans where properties have more equity will achieve lower interest rates and loans where properties have less equity will achieve higher interest rates.
• Credit history: If you have any missed or late payments this can have an impact on the rate even if there is a lot of equity in the property.
• Market conditions: Lenders will adjust the pricing based on internal and external factors.

2^nd charge loans can be either short term until your current Mortgage expires e.g. a couple of years or, for a longer period subject for the purpose of the loan.

The longer the term the cheaper the monthly payments but the amount of interest you pay back at the end will be higher.

Loan terms will vary depending on the reason for the loan.

Minimum Loan: £20,000

Maximum Loan: £1,000,000. Although an exception could be granted if the loan was secured against multiple properties.

Unsecured loans do not take a property as security. This means rates could be higher on unsecured loans as the risk is higher for lenders.

Secured loans require a charge to be taken over the property. If you don’t maintain your payments, the lender could repossess the property the loan is secured against.

We will need to know the following information:

• Borrower/s full names and address
• Security address (The address of the property the loan will be secured against).
• Information about any current Loans secured against the property (having sight of the Mortgage offer would be helpful).
• Amount of loan required and for how long
• Reason for the loan
• Proof of income for the borrower/s
• Full details of any credit commitments e.g. Other loans, credit cards, hire purchase agreements etc
• A copy of the credit report for all borrowers if credit is an issue.