What Is a Second Charge Mortgage?
A second charge mortgage (also called a secured loan or second mortgage) is an additional loan secured against your property, sitting behind your existing mortgage.
How it works
- Your first mortgage remains unchanged
- A second lender takes a “second charge” over your property
- You make separate payments to two lenders
- If you sell, the first mortgage is repaid first, then the second charge from remaining proceeds
Why choose a second charge instead of remortgaging?
Reason 1: Protect Your Great Rate
If you’re on a competitive fixed rate with 2+ years remaining, remortgaging to release equity means losing that rate and potentially paying thousands more in interest. A second charge lets you keep it.
Reason 2: Avoid Early Repayment Charges (ERCs)
Breaking a fixed-rate mortgage early can trigger ERCs of 2-5% of your loan amount. On a £300,000 mortgage, that’s £6,000-£15,000. A second charge avoids this entirely.
Reason 3: Speed
Second charges can complete faster than full remortgages because you’re not changing your main mortgage lender.
Reason 4: Complex Income
If your income has become more complex since your original mortgage (self-employment, multiple income streams), getting a second charge might be easier than re-proving income to a new first-charge lender.
Common Uses for Second Charge Mortgages
Home Improvements
Release £20,000-£100,000+ for extensions, loft conversions, or major renovations that add value to your property. The improvement may increase your home's value more than the loan costs.
Debt Consolidation
Consolidate expensive credit cards, personal loans, or car finance into one lower monthly payment. Warning: you're securing previously unsecured debt against your home, so only do this if you're confident in repaying.
Business Investment
Raise capital to invest in your business, purchase equipment, or bridge cash flow gaps without giving up equity in your company.
Life Events
Fund weddings, once-in-a-lifetime experiences, or unexpected major expenses without depleting all your savings.
Property Purchase
Use equity in your current home to fund a deposit on a second property or investment, without remortgaging your main residence.
Education Costs
Fund university fees or private education when other options aren't sufficient.
Second Charge vs. Remortgage: Which Is Right?
Choose a Second Charge When:
- Your current mortgage rate is excellent (below current market rates)
- You have significant ERCs on your existing mortgage
- You need funds quickly (2-4 weeks vs. 6-8 weeks for remortgage)
- You only need a relatively small amount (£10,000-£75,000)
- Your income situation has become more complex since your original mortgage
Choose to Remortgage When:
- Your current mortgage rate is poor (especially if on SVR)
- You have little or no ERC remaining
- You’re borrowing a large amount relative to your property value
- You want to simplify finances with just one mortgage payment
- Current remortgage rates are competitive with second charge rates
Example Calculation:
Current mortgage: £250,000 at 2.5% fixed for 3 more years (ERC: 3% = £7,500)
Need: £40,000
Option A: Remortgage £290,000 at current rates (4.5%)
- ERC cost: £7,500
- Interest on £290,000 at 4.5%: £13,050/year
- Total first-year cost: £20,550
Option B: Keep existing mortgage + second charge £40,000 at 6%
- ERC cost: £0
- Interest on £250,000 at 2.5%: £6,250/year
- Interest on £40,000 at 6%: £2,400/year
- Total first-year interest: £8,650
In this scenario, the second charge saves £11,900 in the first year.
We’ll run these numbers for your specific situation.
Second Charge Costs & Terms
Interest Rates:
Typically 4-10% depending on:
- Your loan-to-value (lower LTV = lower rate)
- Your credit score
- Loan amount and term
- Your income stability
Loan Amounts: £10,000 to £500,000+ (though most fall in the £15,000-£100,000 range)
Loan Terms: 3-30 years (though typically 5-15 years for most borrowers)
Fees to Expect:
- Arrangement fee: 1-2% of loan amount (sometimes added to loan)
- Valuation fee: £200-£500
- Legal fees: £300-£800
- Broker fee: varies (we’ll discuss our fees upfront)
Combined Loan-to-Value: Most lenders will lend up to 75-85% combined LTV (first mortgage + second charge total).
Example: Property worth £400,000, existing mortgage £200,000 = 50% LTV. You could potentially borrow another £100,000 (taking combined LTV to 75%).
Second Charge Mortgage FAQs
Will my first mortgage lender need to approve it?
They’ll be notified (as the second lender needs to register their charge), but they can’t refuse it unless your mortgage terms specifically prohibit second charges (rare).
Can I get a second charge if I'm self-employed?
Yes, though you’ll typically need 2 years’ accounts or SA302s to prove income.
What if I have adverse credit?
Some second charge lenders specialise in adverse credit cases, though rates will be higher. We’ll find the most competitive option for your situation.
Can I pay it off early?
Usually yes, though early repayment charges may apply in the first 1-3 years. Check the specific product terms. We’ll tailor the deal to fit with your needs.
What happens if I want to move house?
Most second charges are portable (you can take them to your new property) or you repay them from your sale proceeds. Discuss this before taking out the loan.
Is my home at risk?
Yes. Both your first and second charge mortgages are secured against your home. If you can’t make payments on either, your home could be repossessed. Only borrow what you can afford.
Can I have more than one second charge?
In theory yes, though each lender will be in third, fourth position etc., making it progressively harder and more expensive. Most people have just one second charge.
The Responsible Borrowing Check
Before we recommend a second charge, we’ll discuss:
Affordability: Can you comfortably afford both mortgage payments from your income?
Purpose: Is this the right financial tool for what you need? (Sometimes personal loans, credit cards, or remortgaging might be more suitable)
Alternative Options: Have you explored all other options, including remortgaging, personal loans, or delaying the expense?
Long-term Impact: How will this affect your financial position in 3, 5, 10 years?
Exit Strategy: How will you eventually repay this—via remortgage, property sale, or paying it down over time?
We’re here to find the right solution, even if that means advising you that a second charge isn’t suitable.