Second charge mortgages are frequently called second mortgages since they have secondary priority behind your main (or first charge) mortgage. They may be a secured loan, which suggests they normally use the borrower’s home as security. Many people use them to raise money as an alternative to remortgaging, but there are certain things you need 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 implies you will possess two mortgages in your home.
Equity may be the percentage of your dwelling owned outright on your part, the value of the home minus any mortgage owed into it.
For example, if your property is worth £250,000 and you will have £150,000 left to pay for on your own mortgage, you might have £100,000 equity. That means £100,000 will be the maximum sum you may borrow.
Lenders currently have to abide by stricter UK and EU rules governing mortgage advice, affordable lending and handling payment difficulties.
Consequently lenders now must make a similar affordability checks and ‘stress test’ the borrower’s financial circumstances being an applicant for a main or first charge residential mortgage.
Borrowers can must provide evidence that they can afford to repay this loan.
For more details on affordability assessments and evidence in support of your respective application, read How to obtain a mortgage.
Why sign up for a 2nd mortgage?
There are various factors why a 2nd charge mortgage may be worth looking at:
If you’re struggling to acquire some form of unsecured borrowing, like a personal loan, perhaps because you’re self-employed.
If your credit score went down since taking out the initial mortgage, remortgaging could mean you wind up paying more interest on your entire mortgage, as opposed to just in the extra amount you wish to borrow.
Should your mortgage features a high early repayment charge, it might be cheaper that you should take out a 2nd charge mortgage as an alternative to to remortgage.
When a second charge mortgage may be less than remortgaging
John and Claire have got a £200,000 five year set rate mortgage with 3 years to work until the set rate deal ends.
The price of their property has risen given that they took out your mortgage.
They already have chose to set up a family and would like to borrow £25,000 to refurbish their residence. If they remortgage or take out a 2nd charge mortgage?
Should they remortgage, they’ll be forced to pay the £10,000 penalty and there’s no guarantee that they’ll can get a better interest rate than the one they can be currently paying – actually they might have to pay more.
Should they remove another charge mortgage, they will likely pay a higher interest on the £25,000 compared to they pay on their first mortgage, plus fees for arranging the 2nd charge mortgage. However, 62dexkpky will likely be a lot less than making payment on the £10,000 early repayment charge and perhaps an increased rate of interest on their 房屋二胎.
John and Claire decide to take out a secured loan that doesn’t have any early repayment penalties beyond three years (when their main mortgage deal ends).
At this time they can decide whether to determine if they can remortgage both loans to get a better deal overall.