Introduction
A second-charge loan is a type of secured loan that you can take out after you have already taken out a mortgage over your home. It’s designed to help with paying off debts consolidation or major purchases, such as car finance or home improvements. However, interest rates are usually higher than those offered by your first-charge lender but still less expensive than other types of loans in the market.
Second charge loans explained
● Secured against property
Second-charge loans are secured against the property. The lender uses the collateral of the house as security for the loan in exchange for monthly repayments over a set term.
● High-interest rates
A second-charge loan, will typically have a higher interest rates than a first-charge mortgage.
● Borrowing option
If you already have a mortgage, then a secured loan (or second charge) could be one way to help with accessing lending at a lower rate than a Personal and/or Bridging Loan.
For example, if you need to purchase a car or consolidate your debts, then a second-charge loan might be an option for you.
For example, if you need to purchase a car or consolidate your debts, then a second-charge loan might be an option for you.
Difference between first-charge and second-charge mortgages
Your existing mortgage is known as the first charge on your home and can exist alongside another mortgage subject to consent from your existing mortgage lender.
In most cases, first-charge loans are used to purchase the first property while the second-charge loans act as an additional mortgage. When that is the case, the property becomes security for both mortgages if the borrower fails to repay either of them.
Whilst both types of loans are secured against the property itself, they will both have different terms and conditions such as the interest rate, early redemption fees and monthly repayments.
How to qualify for second-charge loans
To be eligible for a second-charge loan, you need to have equity in your home. Also, It’s important to check your income and expenditure before applying for this type of loan to make sure you can afford the monthly loan payments.
Conclusion
If you are interested in a second-charge loan, this blog has probably given you a good sense of direction. To proceed, contact us for more information about the application process and rates.