Second Charge Mortgage Advice in Manchester
Officially known by the name of a “Second Charge Mortgage”, a Secured Loan is effectively an additional mortgage alongside the one you already have, though with interest rates that are higher than the standard amount. This is common with people who are wanting to borrow more than their current lender is willing to lend them.
The reason that these interest rates tend to be higher, is because in the event of arrears and an eventual repossession, the provider of the Secured Loan, the second lender that you borrowed from, must wait for the original provider, the first lender that you borrowed from, to sell the property before getting their money back.
The second lender knows that there is a much higher risk of things going wrong and them not making money back, hence why they opt to charge higher rates of interest. Whilst this is often known as an expensive “last resort”, they can often be incredibly helpful for certain situations.
If you need to raise money against your property, there are 3 main options:
- Borrowing more money from your existing lender.
- Moving to a new lender via the route of a Remortgage.
- Taking out a Secured Loan (Second Charge Mortgage).
When taking out a Second Charge Mortgage, your first mortgage stays exactly the same. The new amount is borrowed from a different lender and a separate direct debit. When it comes to paying these amounts back, the first lender will always take priority and the second lender will usually get whatever is left. If the property sells for enough and has enough equity in it to cover both the first and second charge, with some left over, you get to keep some of it.
The length of this new amount varies, as you could take it out over a shorter or longer-term than your main mortgage. If you’re only in need of a small amount, you may benefit from looking at unsecured borrowing instead of a second charge.
Some of the Main Reasons People Take out Additional Borrowing are:
- Remortgage for home improvements.
- Injecting cash into businesses.
- Paying for school fees.
- Cosmetic surgery.
- Paying for a wedding/honeymoon/special anniversary/holiday.
- Debt consolidation.
- Purchasing cars or other vehicles.
- Paying tax bills.
Reasons why a Second Charge Mortgage may be the Most Suitable Option:
- Your current mortgage rate is low or interest-free and you’d like to keep it.
- Due to early repayment charges, you’re looking to stay away from Remortgaging.
- You need to raise funds very quickly.
- You are recently self employed in Manchester.
- Your income comes from multiple sources.
- Since you last took a mortgage your credit rating has dropped.
- Your current lender disallowed a further advance application.
- You’re raising funds for an unmortgageable property.
- You are looking to raise capital against your UK property to purchase foreign property.
- You’re looking to raise funds and would prefer a different lender.
- You need capital to pay business tax liabilities.
Date Last Edited: December 11, 2023
