According to a recent survey, 80% of consumers have no idea what a second charge mortgage is.
The study indicates that as most people are unaware of second charge mortgages, they are unlikely to consider them as an option when looking for ways to raise money. A second charge mortgage is also known as a secured loan, and makes it possible for homeowners to use the equity in their home to raise money, rather than re-mortgage.
Of the 20% of respondents who did know what a second charge mortgage was, 23% didn’t know what the difference was between a re-mortgage and a second charge mortgage. This type of mortgage is a secured loan which has second priority behind the main mortgage on the property. The home is used as security, and terms can last up to 30 years.
In April 2016, the Financial Conduct Authority introduced new regulations which meant that second charge mortgages would be subject to stricter lending rules, to ensure affordability.
According to the chief executive of personal finance at Together, Pete Ball, there are many circumstances where a second charge mortgage would be a more suitable choice than re-mortgaging. He stated that a second charge mortgage may be more suitable if the borrower had a good rate of interest on their current mortgage deal, which they didn’t want to lose, or if circumstances have changed.
Before applying for a second charge mortgage or re-mortgaging, it is advisable to speak to a CeMAP trained mortgage adviser, so you will know which is beneficial.
