Second charge mortgages are frequently called second mortgages mainly because they have secondary priority behind your main (or first charge) mortgage. They are a secured loan, meaning they normally use the borrower’s home as security. A lot of people use them to raise money rather than remortgaging, but there are certain things you have to be aware about before you decide to apply.
A 二胎 allows you to use any equity you have at home as security against another loan.
It means you will have two mortgages in your home.
Equity is the percentage of your property owned outright by you, which is the value of your home minus any mortgage owed onto it.
As an example, if your property is worth £250,000 and you will have £150,000 left to cover on the mortgage, you might have £100,000 equity. This means £100,000 is the maximum sum you are able to borrow.
Lenders currently have to conform to stricter UK and EU rules governing mortgage advice, affordable lending and working with payment difficulties.
This means that lenders now need to make the identical affordability checks and ‘stress test’ the borrower’s financial circumstances being an applicant for the main or first charge residential mortgage.
Borrowers will ought to provide evidence that they could afford to repay this loan.
For more information on affordability assessments and evidence in support of your application, read How to obtain a home loan.
Why take out a 2nd mortgage?
There are numerous main reasons why a 2nd charge mortgage could possibly 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 score has gone down since taking out the first mortgage, remortgaging could mean you find yourself paying more interest on your entire mortgage, rather than just on the extra amount you want to borrow.
Should your mortgage carries a high early repayment charge, it could be cheaper so that you can obtain an additional charge mortgage instead of to remortgage.
Whenever a second charge mortgage might be less expensive than remortgaging
John and Claire possess a £200,000 five year set rate mortgage with 3 years to operate until the fixed rate deal ends.
The need for their residence has risen because they took out the mortgage.
They already have chose to start up a family and want to borrow £25,000 to refurbish their residence. Should they remortgage or sign up for a 2nd charge mortgage?
If they remortgage, they’ll be forced to pay the £10,000 penalty and there’s no guarantee that they’ll be able to get a greater interest in comparison to the one they may be currently paying – actually they might have to pay more.
Should they sign up for an additional charge mortgage, they will pay a higher interest rate in the £25,000 compared to what they pay on their first mortgage, plus fees for arranging another charge mortgage. However, 62dexkpky will likely be far less than make payment on £10,000 early repayment charge and maybe a better interest rate on their own 房屋二胎.
John and Claire decide to get a secured loan that doesn’t possess any early repayment penalties beyond 3 years (when their main mortgage deal ends).
At this stage they may decide whether to determine if they are able to remortgage both loans to get a better deal overall.