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Second Charge Mortgage Rates

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Nov 8, 2022

Second Charge Mortgage Rates

Second-charge mortgages can be an excellent option for homeowners that are looking for alternatives to remortgaging or getting unsecured loans.

This article will explain what a second-charge mortgage is and how we can help you get the best rates and deals for second-charge mortgages in the UK.

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Second Charge Mortgages Explained

A second charge mortgage is a secured loan against your property’s equity and is made in addition to an existing mortgage.

It is called a second charge mortgage because you will have a second mortgage payment as it is a new loan that is separate from your existing mortgage. This will result in two mortgage repayments that are required.

A second charge mortgage can also be referred to as a second mortgage on a property, and this can be confusing when searching for more information or deals.

It is important to remember that this type of loan is secured against your property, so failure to keep up with repayments for your first mortgage or second-charge mortgage could put your home at risk.

Second-charge mortgages have been FCA (Financial Conduct Authority) regulated since 2016. This ensures lenders comply with rules that have been set in place to protect customers, including those surrounding payment difficulties and affordable lending. Second charge regulated mortgages

A second charge mortgage term will be agreed upon between the customer and lender, typically anywhere between five and 30 years. Customers will also choose between fixed and variable rates depending on their preferences and availability.

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How to Get the Best Rates and Deals for Second Charge Mortgages in the UK

If you are considering a second-charge mortgage, the following information should help you qualify and find the best rates in the UK.

Factors to Consider

Before you start approaching lenders, there areseveralf factors to consider. Ensuring you are in a position to be accepted will help to save time and effort.

Mortgage lenders and loan facilities will consider the following circumstances before accepting requests from potential new customers.

Property Equity

Your property’s equity is a major factor in whether your application will be considered and how much they may be prepared to lend you.

The interest rate and loan amount offered will be dependent on how much equity you have in your property. The equity is worked out by taking the remaining mortgage owed from the property value. For example, if your property is worth £500,000 and you have an existing mortgage that is £200,000, your equity would be £300,000.

Personal Circumstances

Lenders will always look at personal circumstances, including employment and credit rating.

Those with a clean credit score that are looking to loan an affordable amount are significantly more likely to be successful.

Lenders look for low-risk options, and the LTV ratio is an important part of the decision-making process.

The LTV ratio weighs up the potential loan amount against the asset value. In original mortgage applications, significant down payments or deposits on the property will help to reduce the LTV ratio, lowering the risk factor and making it a more attractive option for a mortgage lender.

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Getting the Best Second Charge Mortgage Rates

Now that you know what a second-charge mortgage is and the factors your mortgage lender needs to consider, here are some of the top tips that will help you secure the best second-charge mortgage interest rate.

Speak to Your Current Lender

Your first step to finding the best second-charge mortgage interest rates would be to speak with your existing lender.

Speaking with your original mortgage lender should allow you to get an idea of what offers might be available. In some cases, lenders might offer favourable interest rates for existing customers.

Even if you are offered a good deal, it can still be a good idea to explore other avenues using the deal offered as the benchmark.

Shop Around

The next step should be to browse online to find the best offers that suit your needs. This can include enquiring with individual mortgage lenders or using comparison sites.

Comparison sites can be an excellent way to compare prices and find excellent deals, but it is worth remembering that not all lenders will show up on them, and you may be able to find a better deal by going directly to a lender.

Using a comparison site is a great way to get a general idea of what interest rates are available and can be used to compare against individual lenders or your existing mortgage provider.

Make Use of Second Charge Mortgage Experts

After checking with your existing provider and looking at comparison sites, the final option is making use of the experts and speaking with a mortgage broker.

Here at Loan Corp, we use our experience in the industry to provide you with valuable information that can help you make the right decision when choosing a second-charge mortgage lender.

As well as providing you with excellent advice, we can also explore the market to find the best interest rates and terms to suit your needs.

The benefit of working with an experienced mortgage broker like Loan Corp is that we can answer any questions you may have and provide valuable advice that helps you secure a second-charge mortgage at terms that provide long-term benefits.

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Second Charge Mortgage Examples

In order to give you a better idea of what you can expect on the market, the following examples show what kind of interest rates are available for second-charge mortgages in the UK. These examples are true at the time of writing. However, interest rates are subject to change, and prices may vary when checking at a later date.

These examples provide the lender, initial interest rate, total repayable amount, and monthly repayments on a £30,000 loan payable over a term of 15 years.

  • Pepper Money – Initial Interest Rate of 4.74 % – Total Repayments £41,974.20 – Monthly Repayments £233.19
  • Shawbrook Bank – Initial Interest Rate of 6.24% – Total Repayments £46,279.80 – Monthly Repayments £257.06
  • West One – Initial Interest Rate of 6.25% – Total Repayments £46,306.80 – Monthly Repayments £257.26
  • Step One Finance – Initial Interest Rate of 6.45% – Total Repayments £46,909.80 – Monthly Repayments £260.61
  • Oplo – Initial Interest Rate of 7% – Total Repayments £48,524.40 – Monthly Repayments £269.58
  • Together – Initial Interest Rate of 7.79% – Total Repayments £50,947.20 – Monthly Repayments £283.04
  • Union Trust Bank – Initial Interest Rate of 8.09% – Total Repayments £51,879.60 – Monthly Repayments £288.22
  • Spring Finance – Initial Interest Rate of 9.40% – Total Repayments £56,050.20 – Monthly Repayments £311.39
  • Equifinance – Initial Interest Rate of 10.75% – Total Repayments £60,537.60 – Monthly Repayments £336.32
  • Lesley Stephen and Co – Initial Interest Rate of 12% – Total Repayments £64,809.00 – Monthly Repayments £360.32
  • Evolution – Initial Interest Rate of 14.52% – Total Repayments £73,810.80 – Monthly Repayments £410.06

As you can see from the examples provided, there is a significant difference between the best and most expensive prices of over £30,000.

While there may be additional benefits and protection with certain offers, getting expert advice when searching for a competitive interest rate can help to save you thousands.


Contact Us Today

If you are considering taking out a second loan, we can help you with any questions you may have and ensure you find the best deals and interest rates on the market.

With access to over 200 UK lenders, we are confident we can find you competitive interest rates that will help to reduce your second mortgage repayments.

We have decades of finance experience and access to state-of-the-art tech that helps us streamline application processes.

Call today on 0808 301 9509 or use our handy online contact form to let us know how we can help, and we will get back to you within two hours from Mondays to Fridays 8 to 5 or four hours over bank holidays and weekends.

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What is the difference between a remortgage and a second charge mortgage?

A second-charge mortgage allows homeowners to borrow against the equity on their property and is separate from the first mortgage, which continues and must also be paid.

Remortgaging a property would consist of renegotiating the original mortgage. This can also allow the homeowner to free up funds against the equity.

The main difference is that a second mortgage is separate from the first, and this can be beneficial if you have a good interest rate on it. This can help you to save money in the long term.

Can I pay off a second charge mortgage early?

Paying off a second mortgage early if you have the money might sound like a great way to avoid paying the interest that would be due over the extended period, but there will typically be an early repayment charge to do this.

Early repayment charges will vary depending on the lender and whether you are on a fixed or variable rate, and you should check the terms and conditions of any agreement before signing.

Mortgages will typically allow you to overpay a certain amount every month or year. Doing this will help reduce the capital and monthly payments and the overall interest you will have to pay over the term.

What are the main reasons someone might want a second-charge mortgage?

There are many reasons people explore second mortgage options. Some of the most common is that they need funds to carry out home improvements, would like to extend a lease, or are planning to invest in another property.

Some people may also want to free up capital to cover bills, buy a new car or lend money to friends or family.

A second-charge mortgage can be a good option if they are struggling to secure personal loans, have a bad credit score, or face charges to switch from an existing mortgage.

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Is a third-charge mortgage possible?

Getting a third-charge mortgage on your property is possible, and the principles are the same as that for a second-charge mortgage.

You must have available equity on the property you plan to borrow against, and your circumstances should also be appealing to lenders.

A third loan may have a higher interest rate, and you will have to pass affordability checks to ensure the risk to the lender is minimal.

Are there any cons to having a second mortgage?

When applying for a secured or unsecured loan, you must always weigh the pros and cons to ensure it is the right decision for your circumstances.

Some disadvantages to a second mortgage include higher interest rates than first mortgages to reflect the risk the lender is taking.

Another significant disadvantage is that you will be paying two mortgages at the same time, and the penalty for failing to make payments to either could be catastrophic and lead to the loss of your home.

If you struggle with payments and decide to sell the property, the lender can pursue you if the sale does not cover both mortgages unless they agree to the transfer of your second charge mortgage to the new property.

You must seek permission from your current mortgage lender before applying for a second mortgage, and there will be similar fees and early repayment charges to the initial mortgage.


Final Thoughts

If you are contemplating a secured loan, a second-charge mortgage can be an excellent option as long as you do your research and find the best offer for your needs.

You should always think carefully before securing a second mortgage to ensure it is the best decision, and this is where an experienced second-charge mortgage broker can be invaluable.

At loan corp, we look at your circumstances and explore the best options to help you find the best option and minimise the overall cost.

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