Second charge mortgages tend to be called second mortgages because they have secondary priority behind your main (or first charge) mortgage. These are a secured loan, which suggests they use the borrower’s home as security. A lot of people make use of them to improve money instead of remortgaging, but there are certain things you ought to be conscious of prior to apply.
A 二胎 enables you to use any equity you may have in your home as security against another loan.
It means you will possess two mortgages on your own home.
Equity will be the percentage of your residence owned outright by you, which is the value of the home minus any mortgage owed into it.
For example, if your property is worth £250,000 and you will have £150,000 left to cover on your own mortgage, you possess £100,000 equity. It means £100,000 will be the maximum sum it is possible to borrow.
Lenders have to conform to stricter UK and EU rules governing mortgage advice, affordable lending and working with payment difficulties.
Consequently lenders now need to make exactly the same affordability checks and ‘stress test’ the borrower’s financial circumstances being an applicant for any main or first charge residential mortgage.
Borrowers will need to provide evidence that they could afford to pay back this loan.
For more information on affordability assessments and evidence in support of your application, read How to apply for a mortgage loan.
Why sign up for an additional mortgage?
There are numerous reasons why a 2nd charge mortgage may be worth considering:
If you’re struggling to acquire some sort of unsecured borrowing, say for example a personal loan, perhaps because you’re self-employed.
If your credit rating went down since getting the initial mortgage, remortgaging could mean you end up paying more interest on your entire mortgage, rather than just in the extra amount you wish to borrow.
Should your mortgage carries a high early repayment charge, it may be cheaper for you to remove an additional charge mortgage as an alternative to to remortgage.
Every time a second charge mortgage might be cheaper than remortgaging
John and Claire have got a £200,000 five year set rate mortgage with 36 months to operate up until the fixed interest rate deal ends.
The value of their property has risen since they took out of the mortgage.
They may have decided to start a family and want to borrow £25,000 to refurbish their property. If they remortgage or remove an additional charge mortgage?
When they remortgage, they’ll be forced to pay the £10,000 penalty and there’s no guarantee that they’ll get a better interest than the one they are currently paying – in fact they may need to pay more.
If they take out a 2nd charge mortgage, they will pay a better rate of interest on the £25,000 compared to what they pay on his or her first mortgage, plus fees for arranging another charge mortgage. However, 62dexkpky will likely be much less than paying the £10,000 early repayment charge and maybe a better interest rate on his or her 房屋二胎.
John and Claire decide to get a secured loan that doesn’t possess early repayment penalties beyond 36 months (when their main mortgage deal ends).
At this time they could decide whether to see if they could remortgage both loans to get a better deal overall.