Second charge mortgages are usually called second mortgages simply because they have secondary priority behind your primary (or first charge) mortgage. They can be a secured loan, which suggests they normally use the borrower’s home as security. Lots of people use them to boost money as an alternative to remortgaging, but there is something you have to be aware of prior to apply.
A 二胎 enables you to use any equity you might have in your home as security against another loan.
This means you will have two mortgages on your own home.
Equity is the percentage of your residence owned outright by you, which is the value of the home minus any mortgage owed into it.
As an example, if your property is worth £250,000 and you have £150,000 left to cover in your mortgage, you possess £100,000 equity. It means £100,000 will be the maximum sum you may borrow.
Lenders will have to comply with stricter UK and EU rules governing mortgage advice, affordable lending and working with payment difficulties.
Consequently lenders now need to make the same affordability checks and ‘stress test’ the borrower’s financial circumstances being an applicant for the main or first charge residential mortgage.
Borrowers will need to provide evidence that they can afford to repay this loan.
For more information on affordability assessments and evidence in support of your own application, read How to obtain a home financing.
Why sign up for another mortgage?
There are several factors why an additional charge mortgage could possibly be worth taking into consideration:
If you’re struggling to obtain some form of unsecured borrowing, like a personal loan, perhaps because you’re self-employed.
If your credit score has gone down since taking out the initial mortgage, remortgaging could mean you find yourself paying more interest in your entire mortgage, as opposed to just around the extra amount you need to borrow.
Should your mortgage includes a high early repayment charge, it might be cheaper that you should sign up for another charge mortgage as an alternative to to remortgage.
Every time a second charge mortgage could possibly be less expensive than remortgaging
John and Claire use a £200,000 five year fixed interest rate mortgage with 3 years to work before the set rate deal ends.
The need for their residence has risen simply because they took out of the mortgage.
They already have decided to start a family and want to borrow £25,000 to refurbish their property. Should they remortgage or take out another charge mortgage?
If they remortgage, they’ll need to pay the £10,000 penalty and there’s no guarantee that they’ll can get an improved interest than the one they are currently paying – the truth is they may need to pay more.
Once they obtain another charge mortgage, they are going to pay a greater interest rate about the £25,000 than they pay on their first mortgage, plus fees for arranging the second charge mortgage. However, 62dexkpky will likely be far less than paying the £10,000 early repayment charge and perhaps a higher rate of interest on the 房屋二胎.
John and Claire decide to take out a secured loan that doesn’t possess any early repayment penalties beyond 36 months (when their main mortgage deal ends).
At this point they can decide whether to ascertain if they are able to remortgage both loans to get a better deal overall.