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What is a Second Charge mortgage and should it be my first choice?

What is a Second Charge mortgage and should it be my first choice?

Once considered as a last resort option for raising funds, Second Charge Mortgages are quickly becoming part of mainstream lending, as more homeowners than ever before look for an alternative to remortgaging or taking out a personal loan.

Contracting Scout’s mortgage partner, CMME, has put together this helpful post which outlines everything that you need to know about Second Charge Mortgages, so that you can make a well-informed decision about whether it’s the best option for you.

What are Second Charge Mortgages?
Also known as secured loans, a Second Charge Mortgage uses the borrower’s home as security, helping them to raise funds against their property for a wide range of purposes.  They are often used to raise additional funding when a homeowner’s existing lender will not, or cannot, release any additional funds.

From raising funds for home improvements, or for the purpose of buying a new vehicle through to paying for a wedding, injecting cash into a business, paying a tax bill or even funding cosmetic surgery, there are many reasons why people decide to take out a Second Charge Mortgages.

Allowing homeowners to retain their current mortgage at a competitive interest rate, a Second Charge Mortgage is widely associated as being the best option for those that have recently become self-employed, people who need to raise funds quickly, property owners with a poor credit rating, as well as those looking to raise capital against their UK property in order to purchase premises abroad.

Second Charge Mortgages still need to be repaid alongside your first mortgage and if your home is repossessed, lenders will recover funds in order of their charge. Just like with any mortgage, failing to repay it could mean you’ll lose your home.

Other reasons why people choose to get a Second Charge Mortgage

  • Helping with University fees
  • Helping your family with a deposit for their first home
  • Buy-to-let property purchase
  • Children’s tuition fees
  • Payment of a tax bill
  • Transfer of equity
  • Lease extension
  • Exit for an existing bridging facility

How much can you borrow?
How much you can borrow all depends on the existing equity in your home, which in simple terms is the percentage of your property that is owned outright by you.

You can calculate this by establishing the value of mortgage owed on your property against the value of the home. For example, if you bought a house for £300,000 and you have £250,000 left to pay on the mortgage, then you have £50,000 equity – this can change in response to changing property demands, especially if your property increases in value.

Opting for a Second Charge Mortgage will allow you to access an approved loan secured against the equity in your property. This means you will then be able to apply for a Second Charge, which is subject to underwriting and valuation by the lender.

In the majority of cases, homeowners that choose a Second Charge Mortgage as an alternative method of raising funds tend to borrow anything between £1,000 and £30,000, and all cases are reviewed on a case-by-case basis.

CMME has recently announced a first-to-market Second Charge mortgage solution. CMME will now provide a one-stop solution for contractors, business owners and other professionals looking to take advantage of their home equity. With total Second Charge lending passing the £1bn milestone in 2017, it’s clear Second Charge mortgages are becoming a more mainstream and popular form of secure lending.

Next Steps
If you are a contractor seeking specialist mortgage advice for any type of mortgage, Contracting Scout can put you in touch with CMME who are experts in contractor mortgages.

If you’re looking for specialist advice regarding mortgages for independent professionals, we would wholeheartedly recommend CMME. Whether you classify yourself as a contractor, freelancer or simply self-employed, CMME are able to rely on more than a decade’s worth of expertise to ensure you get the right help and the best deal.

Having helped thousands of independent professionals receive the mortgage funding they require, CMME are ready and able to help you finance your new home or property.

Contracting Scout are not authorised to offer regulated mortgage advice. Contracting Scout are introducers to CMME.

Your home may be repossessed if you do not keep up repayments on your mortgage.


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