A mortgage is no more than a secured loan against an asset by way of a lien. A second charge works in exactly the same way.
In other words, a lender loans money to a borrower so that he / she may buy a property. The loan is conditional upon a variety of terms, one of which is the defined collateral for the debt. In this instance, collateral is another name for ‘security’ and this is secured by way of a lien.
The registration of a loan against a property’s title is referred to as a ‘charge’.
Most properties have only one debt registered against them (because most people take out only one loan when purchasing a property) although sometimes a borrower might extend or add to his or her mortgage during its term in order to raise money, perhaps for a home extension - or a child’s wedding.
From time to time, a home owner might be unable to raise money through their primary mortgage lender due to their circumstances or the criteria set by the lender. In these cases the homeowner may wish to borrow money but he cannot borrow it from his existing lender. In these circumstances, it is possible to raise more money by way of a secured loan, with a different lender. It is normal for the new lender to take a second charge against the borrower’s property.
A second charge is a secured loan but it will have less precedence than a first charge. If the borrower defaults on either the first or second charge, either lender can instigate repossession proceedings. However, the first charge lender gets their money first, and there may not be enough money left to repay the second charge lender. In this case, the lender will have to look at other ways to reclaim their outstanding debt.
When taking a second charge mortgage lenders will always consider the affordability of the new repayments and whether the loan will over extend their borrowings. However, in some cases borrowing by way of a secured loan is a far better way of raising money as terms are normally much cheaper and over longer periods than a shorter, unsecured loan agreement.
Here at Mortgage Required, we specialise in secured loans so please get in touch on 01628 507477 if you need more information.
Related articles:
Download our Free First Time Buyers Guide
Recent posts
The most wonderful time of the year can easily turn into the most expensive time of the year. Watching the pennies doesn’t mean that the Christmas festivities have to stop, following a few budgeting tips can mean you still have a special Christmas and don’t go into the new year in debt.
Preparing your home to sell in winter
4 days ago
December is usually a less desirable time to buy as many people don’t want to move over the holidays. However, prospective buyers do start to look at this time. Selling your home in winter may require a bit of extra attention to showcase your property at its best.
We look at why mortgage rates increased following the Bank of England's choice to reduce the bank rate, and should you fix now?
UK 2024 Autumn Budget: Housing
30 Oct 2024
On 30th October 2024 the Chancellor, Rachel Reeves delivered the Autumn budget which we had previously been warned would be “difficult”. Below we have summarised the main housing points.
Talking about money with kids
23 Oct 2024
In an increasingly cashless society, money is an intangible concept for children to grasp. In the days of coins and notes, kids could see money as something physical you require to purchase goods and services.
In order to help teach your children about money, we have listed some tips below;
Labour Autumn Budget Predictions: Housing
18 Oct 2024
The UK’s chancellor, Rachel Reeves will deliver the Labour government’s autumn budget at the end of the month, we take a look at what could be announced in relation to housing.
Recent research from Halifax has revealed the most sought-after locations for first time buyers in Britain.
The data which was taken from the Halifax House Price Index looked at areas outside of London where those looking to purchase their first property were buying. Despite high property prices and increased rates, these first time buyer hotspots have remained popular.
How can I look after my mental health?
7 Oct 2024
Taking care of your mental health means looking after your emotional, psychological, and social wellbeing. There are several ways we can practice self-care that will help to improve our physical and mental health. This can help to reduce our risk of illness, manage stress, and boost our energy levels!
More information
Trusted by
