Remortgage versus second charge mortgage – which is the way to go?

Increasing numbers of home-owners are looking at applying for a second mortgage. 

Extra funds could be needed for an infinite number of reasons, and second charge mortgages are becoming a very popular alternative to a straightforward remortgage. But, what is it exactly?

A second charge  mortgage is basically a loan against your home for a smaller amount. Any equity available in your property is used as security against the loan.

You would normally go to a separate lender from the one you already have, to apply for one.

If for example you had a mortgage for £100,000, and you wanted to raise an additional £10,000, many of you could find you may not have that option open to you. Some lenders might not offer a further loan unless you remortgage the entire £100,000 at a higher rate.

Factors like your age may have become an obstacle or perhaps a change in circumstances means that you won’t pass the new affordability tests. For others, refinancing your main mortgage may not make financial sense, as the original low interest rate may be affected. Therefore, if some lenders are not allowing an additional advance, some of you may well be feeling short of options.

For those of you without the option of repaying early, your lender might charge you a high penalty to remortgage and release equity. In this case, taking out a second mortgage could be a cheaper option as there won't be an ERC to pay. 

To find out what second charge rates are on offer, and for a like for like product comparison, contact Deal Direct for advice and a quote.

Call us now on 0800 048 8828 and speak to one of our expert mortgage advisors.