Glossary · UK
What is Second Charge Mortgage?
A secured loan taken against a property that already has a mortgage, ranking behind the first lender if the home is repossessed.
Full Definition
A second charge mortgage is a loan secured against a property that already carries an existing (first charge) mortgage. It is sometimes called a secured loan or homeowner loan. The lender takes a second-ranking charge over the property, meaning that if the home is sold or repossessed, the first mortgage lender is repaid in full before the second charge lender receives anything. Borrowers use second charge mortgages to release equity - for home improvements, debt consolidation or large purchases - without disturbing a favourable rate on their main mortgage or paying early repayment charges. Because the lender's security ranks behind the first charge, interest rates are usually higher than on a standard first mortgage. In the UK these loans are regulated by the Financial Conduct Authority and require affordability checks. The amount available depends on the equity you hold, that is the property value less the outstanding first mortgage. Missing payments can put your home at risk, so it should be considered carefully against remortgaging or a further advance.