Is a second-charge mortgage a good idea?

To answer this question, let’s first look at what a second-charge mortgage is? Basically speaking, it is an additional mortgage you take out on your property without having to re-mortgage your current mortgage.

There are a variety of reasons why someone may take out a second charge mortgage. These could be for debt consolidation – such as credit card debt. Someone may consider this option as mortgage interest rates tend to be lower than traditional credit card rates.

second-charge mortgage

Or they may have a debt with a bank or take out a loan for a new car. They may find managing debts from several places to be overwhelming and keeping on top of different interest rates for each of the loans that they have maybe frustrating. Thereby they decide to take out a second-charge mortgage to pay off all their current debts and manage the overall debt in one place.

Another reason could be home improvements or complete renovation. A person may have been living in their house for a while and may want to bring the home up to date with current trends – such as new bathrooms, kitchens. Or they simply may want to add value to the property by adding an extension or loft conversion.

Another example could be that the buyers are starting a family, and need to adapt their house for a family, this could be creating a nursery, doing some work to the garden, or making space for a family dining area. Whatever the reason, second-charge mortgages are another way for a buyer to take additional funds without encroaching on the existing mortgage.

A second-charge mortgage could also be used for a business cash injection – why would a business want to do this? A business could be thinking about expanding or carrying out a promotional campaign. However, the business may not have enough in the bank to do this, so the director of the business may opt for a second-charge mortgage against a property they own to help boost their business.

Or the business may own property, such as business offices, or manufacturing plant – the business may decide to take a second-charge mortgage against these.

Alternatively, the business may want to purchase or manufacture new products, which requires a cash injection to produce. There could be many reasons a second-charge mortgage could be useful to a business, such as paying off debt.

The second-charge mortgage may not be available through high street lenders; however, specialist mortgage brokers can usually help you with this type of mortgage.

A key thing to remember with any mortgage is key advice from the FCA (Financial Conduct Authority) “your home may be repossessed if you do not keep up with payments”.

Journey Mortgages is a specialist broker that can help you with second-charge mortgages and more. Get in touch, and one of our friendly team with be happy to help you with your inquiry.

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