A second charge mortgage, also known as a ’secured loan’ or ‘second mortgage’ allows you to borrow money, whilst leaving your existing mortgage in place. A second charge mortgage requires you to provide your home as security.
Second charge mortgages are loans that are secured against your property, but have a lower priority than your first main mortgage. This means that if you default on your mortgage and your home has to be sold, the proceeds from the sale will initially go towards repaying your first charge mortgage, before any money is paid to the lender of your second mortgage.
For this reason the cost of a second charge loan will always be higher than a first mortgage loan, as the lender is taking on a greater risk.
Second charge mortgages can be used for a variety of purposes, including home improvements and debt consolidation, you can even get a second mortgage on a buy to let property.
Second charge lenders prefer to lend if they can secure a legal charge against your property. This does require the consent of your current lender. If this is not possible, then a few lenders will grant loans on the basis of an equitable charge.
A HELOC, or Home Equity Line of Credit, is a more flexible version of a secured loan. It provides you with a revolving credit facility, so you can borrow, pay back and re-borrow. HELOCs are most popular in the USA and Canada.
