Second Charge Mortgage Rates

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Second charge mortgage rates

The interest rate of a second charge mortgage depends on various different factors, including the amount of money you are looking to borrow, the repayment term and your personal circumstances like your credit history.

Second charge mortgage rates are usually lower than other forms of borrowing such as an unsecured loan, this is because the money is secured against your home.

Most lenders will complete a soft and hard credit search to understand how much you could afford and your financial circumstances. Interest rates are likely to be higher for someone that has bad credit. This is because they are considered more of a risk due to their financial history.

However, as a specialist lender with flexible criteria we can help people with complex financial circumstances.

All applications, whether you have good or bad credit are considered on an individual basis - whatever your credit profile, we will do our best to help you get the secured loan you need.

At Central Trust, we will always give you the best possible interest rate. We will only ever recommend a product that meets your needs and circumstances, to ensure that you can afford to repay each month.

Different types of second charge mortgage rates

Second charge mortgages can have two different types of interest rates, a fixed rate or a variable rate. It’s important to understand how interest rates work and how they can affect you.

The rate you are charged by your mortgage lender will determine how much your monthly repayments will be, which also affects the amount you will pay back overall.

A fixed rate means you are charged a fixed amount of interest every month throughout the loan. This means that your monthly repayments are always a set amount, unlike a variable rate.

Because of this, fixed rates are often considered a safer option. It can be useful to know exactly what you are required to pay each month, making budgeting easier.

A secured loan with a variable interest rate means that the rate you receive when taking out the loan is subject to change. The interest rate changes when the Bank of England base rates changes, therefore some months your repayments could cost more than others. Equally, you may end up with a lower rate with a lower monthly repayment.

This does also mean that if interest rates increase you could end up repaying a lot more than you originally budgeted for. If you are unsure about being able to afford increased repayments, or you want the certainty of a fixed repayment amount, a fixed interest rate may be the best option.

How does a second charge mortgage work?

A second charge mortgage is another name for a loan secured against your home. These loans are taken out in addition to your first mortgage, hence “second charge”.

A second charge mortgage is a loan that is secured against the equity in your property. These are often referred to as secured loans or homeowner loans.

The amount you can borrow relies on the available equity that’s in your home. This is what’s left when you subtract what’s outstanding on your mortgage, away from the value of your home.

Your home acts as a form of security for lenders if you are ever unable to keep up with the monthly repayments. This therefore means if you don’t own a property, you are unable to take out this type of loan.

With a second charge mortgage you would essentially be borrowing a second line of money in addition to your current mortgage. Therefore, two loans would be secured against your property.

What to consider before taking out a second charge mortgage

There are various different factors you should consider when taking out a second charge mortgage.

Taking out a second charge mortgage means that you will be securing your loan to your property. By doing so, you are proving to the lender that you can and will be able to pay them back.

It’s therefore important to understand the risks that are associated with this type of loan. If you fail to make your monthly repayments, the lender has the right to repossess your property. However this is usually the last resort.

Before taking out a second charge mortgage it’s important that you assess your finances. Although your lender will complete affordability checks, you should also ensure that you can afford to make the monthly repayments over the term of the mortgage.

Lenders will still check your affordability regardless of your credit score. They will ask questions about your finances to better understand your circumstances. It’s likely that they will complete a hard and soft credit search at some point of your application. This may influence their decision as to whether or not they can lend you the money.

All lenders have their own criteria so their questions may differ. However most lenders will look at your income, other loans you are currently paying off, the equity in your home and your monthly expenses.

Is a second charge mortgage a good idea?

A second charge mortgage can be used for a variety of reasons, although they are commonly used to consolidate debts, make home improvements and purchase a buy to let property.

Typically, they are used by those with poor credit profiles. This is because the loan is secured against your property, which means there is less risk involved for the lender.

Unsecured loan lenders may not be able to help at all, or the rate may be significantly higher in comparison to a secured loan. Often with an unsecured loan they are unable to help people with poor credit profiles, this is because there is more risk involved as they don't have the security of an asset.

If you are looking to borrow a larger amount of money, a second charge mortgage might be the best option. With a second charge mortgage you can typically borrow more money over a longer term in comparison to an unsecured loan, due to the security of your property.