Second charge mortgages explained

“Secured loans” are now called “second charge mortgages”

Due to recent regularity changes secured loans are now called second charge mortgages, this page will give you some general information you will need to know.

Repayment Option

APRC from 5.1%

Representative example if you choose to add fees to the loan.

Assumed borrowing of £35,000 over 120 months (10 years) plus a broker fee of £2,870.00 and a lender fee of £367.50 would result in monthly repayments of £476.14, the borrowing rate is 8.6%, the APRC is 11.2% (variable) total charge for credit would be £22,136.80 and the total amount payable would be £57,136.80.

You can opt to pay the lender and/or broker fees up front, this can be discussed when applying.

How long can I take out a second charge mortgage for, and what can it be used for?

  • Debt Consolidation
  • Motor Home or Caravan
  • Medical Bill
  • Business Loans
  • Holiday
  • Home Improvements
  • Car
  • Freehold Purchase
  • Tax Bill
  • Purchase Second Home
  • Home Furnishing
  • Wedding
  • School Fees
  • Funeral
  • Purchase Rental Property

Types of available borrowing


Fixed rate mortgages

The interest rate you pay will stay the same throughout the length of the fixed rate period no matter what happens to the interest rates.

Advantages

Peace of mind that your monthly repayments will stay the same during the fixed rate period, helping you to budget.

Disadvantages

Fixed rate deals are usually slightly higher than variable rate mortgages. If interest rates fall, you won’t benefit.

Look out for

Charges if you want to leave the deal early – you could be tied in for the length of the fixed period. At the end of the fixed period – you should look for a new mortgage deal two to three month before it ends or you’ll be moved automatically onto your lender’s standard variable rate which is usually higher.


With variable rate mortgages, the interest rate can change at any time. Make sure you have some savings set aside so you can afford an increase in your payments if rates do rise. Variable rate mortgages come in various form:

Standard variable rate (SVR)

This is the normal interest rate your second charge mortgage lender applies and it will last as long as your mortgage or until you take out another mortgage deal. Changes in the interest rate may occur after a rise or fall in the base rate set by the Bank of England or whichever reference rate the lander my use.

Advantages

You can overpay or leave at any time.

Disadvantages

Your rate can be changed at any time during the loan.


Tracker mortgages move directly in line with another interest rate – normally the Bank of England’s base rate plus a few percent. So if the base rate goes up by 0.5%, your rate will go up by the same amount. Usually they have a short life, typically two to five years, though some lenders offer trackers which last for the life of your mortgage or unitil you swtch to another deal.

Advantages

If the rate it is tracking falls, so will your mortgage payments.

Disadvantages

If the rate it is tracking increases, so will your mortgage payments. You may have to pay an early repayment charge if you want to switch befor the deal ends.


Prior to the completion of your mortgage you will be provided with your chosen lenders tariff of charges. They will detail all other potential costs not already included in the total cost of credit: for example: Service and administration fees, arrears and defaults charges and repossession and litigations fees.


A valuation of the property that the mortgage will be secured against is required. The valuation will be conducted by a surveyor from your chosen lenders preferred panel and will be arranged for you. There will be no separate charge for the valuation as this will be included in the broker fee.


You should think carefully before securing debts against your home. Failure to repay your mortgage may result in charges for late payments, missed payments and defaults. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP
REPAYMENTS ON ANY MORTGAGE SECURED ON IT.

Before taking out any mortgage you should consider whether you are aware of any circumstances now and in the future which mean that your regular income will reduce. It’s important that you can afford the repayments now and continue to do so throughout the term of the loan. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.