A second charge mortgage lets you borrow money secured against your property without replacing your existing mortgage. If you have a competitive first mortgage you do not want to lose, or breaking it would cost more than it saves, a second charge is often the better route. Here is how it works, what second charge mortgage rates look like, and when it makes sense over a remortgage.
A second charge mortgage is a loan secured against your property that sits behind your existing mortgage. The existing mortgage is the first charge; this new loan is the second charge. If you sell or the property is repossessed, the first charge lender is paid first, then the second charge lender. Because of that extra risk, second charge mortgage rates are typically higher than first mortgage rates. But the key advantage is that you do not touch your existing mortgage deal at all.
Your existing mortgage is a legal charge registered against your property at the Land Registry. A second charge mortgage adds a second legal charge on top of that. Two separate loans, two separate lenders, both secured on the same property. You keep your existing mortgage exactly as it is. The second charge lender lends you additional money, takes a second charge over the property, and you repay the two loans separately.
The first mortgage lender is notified but does not typically need to give formal consent. Their position is not affected. They remain first in line if the property is ever sold or repossessed. The second charge lender knows they are second in line, which is why they price accordingly.
A remortgage replaces your existing mortgage with a new one. That works well when your current deal is ending anyway. But if you are mid-fix with a competitive rate, breaking early triggers an early repayment charge (ERC) which can cost thousands. A second charge mortgage lets you raise the money you need without paying that ERC or losing your existing rate.
| Factor | Second charge mortgage | Remortgage and capital raise |
|---|---|---|
| Existing mortgage | Kept exactly as is | Replaced with new mortgage |
| Early repayment charge | None on existing mortgage | Payable if mid-fix |
| Rate on existing borrowing | Unchanged | New rate on full balance |
| Lenders involved | Two separate lenders | One lender (new or existing) |
| Best when | Competitive first mortgage, mid-fix, circumstances changed | Deal ending, no ERC, straightforward application |
You fixed at a low rate and have two or three years remaining. Breaking the deal would trigger an ERC of perhaps 2% to 3% of the outstanding balance. That could easily be £4,000 to £6,000 or more on a typical mortgage. A second charge mortgage lets you access your equity without paying that penalty and without losing the rate you locked in. The second charge rate will be higher, but on a smaller sum, and you protect the low rate on the larger first mortgage.
You are now self-employed, your income has changed, or you have had some credit issues since taking the first mortgage. A mainstream remortgage lender might not offer you the same terms you currently have. A second charge mortgage lender assesses only the second charge application on its own merits. Your existing first mortgage is untouched. Some specialist second charge lenders are more flexible on income and credit than mainstream first mortgage lenders. See also our guide to mortgages with a CCJ for more on how adverse credit lenders assess applications.
Extensions, loft conversions, kitchen renovations. These cost more than most unsecured personal loans will cover at reasonable rates. A second charge mortgage secured against the property gives access to larger sums at lower rates than unsecured borrowing, without disturbing the first mortgage. The improvement may also increase the property value, which improves the overall equity position.
A second charge mortgage bad credit application is more common than many borrowers expect. A CCJ, default or missed payment history does not automatically rule out a second charge mortgage. Some second charge lenders specialise in adverse credit cases and assess applications individually. The rate will be higher and the combined LTV the lender will accept may be lower, but a second charge can often be arranged in circumstances where a remortgage to a high street lender would not be possible.
Second charge mortgage rates are higher than first mortgage rates. This is a function of risk: the lender knows another lender has first claim on the property, so they price in the additional exposure. The rate you are offered depends on your combined loan-to-value across both mortgages, your credit profile, your income, and the specific lender's appetite for your type of case.
Beyond the interest rate, second charge mortgages typically involve arrangement fees, valuation fees and legal costs. These should be factored into any comparison against remortgaging. A second charge mortgage calculator can give you an initial sense of the monthly cost across different loan amounts and rates before you speak to a broker. A whole-of-market broker presents the total cost of each option, not just the headline rate.
A second charge mortgage sitting alongside a competitive first mortgage can produce a better overall position than breaking the first mortgage and remortgaging to a single new deal at a higher rate. But this depends on the specific numbers: the ERC on the first mortgage, the second charge rate, the term, and all associated fees. Do not assume either option is better without running the actual comparison for your situation.
Woodhall Mortgages is a whole-of-market, FCA-authorised mortgage broker (FRN 762513) based in Halifax, West Yorkshire. We compare second charge mortgage lenders across the market and assess whether a second charge or a remortgage and capital raise gives the better overall outcome for your specific circumstances. We also advise on remortgages, unencumbered mortgages and the full range of mortgage products. Initial discussion free of charge.
Woodhall Mortgages compares second charge mortgage lenders across the market and advises on whether a second charge or a remortgage gives the better overall outcome for your situation.
Get Second Charge AdviceReviews and testimonials reflect individual experiences and do not guarantee outcomes.
Woodhall Mortgages compares second charge mortgage lenders across the market and advises on whether a second charge or a remortgage gives the better overall outcome. Initial discussion free of charge.
Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. A £299 broker fee is payable on a successful mortgage offer if you choose to proceed. This fee is non-refundable once the offer has been issued. We may receive commission from lenders.
Get Second Charge AdviceWoodhall Mortgages is authorised and regulated by the Financial Conduct Authority (FRN 762513). Woodhall Mortgages is a whole-of-market mortgage broker. We consider a comprehensive range of mortgages from across the market, but not all lenders or products may be included. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. A £299 broker fee is payable on a successful mortgage offer if you choose to proceed; this fee is non-refundable once the offer has been issued. We may receive commission from lenders.
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