A second mortgage is a loan that you can take out on a property you already own while still having an existing mortgage. It is also known as a second charge mortgage, as it ranks behind your primary (first charge) mortgage in terms of priority.
A second mortgage is an additional loan on top of your existing mortgage, and gets paid off after your original mortgage is paid.
When you apply for a second mortgage, the lender will assess the value of your property and the outstanding balance on your primary mortgage, then offer you a loan based on that. The second mortgage will be secured against your property and will have its own repayment terms and interest rate.
The second mortgage will be secured against your property and will have its own repayment terms and interest rate. They will determine how much equity you have and offer you a loan based on that equity. When you apply for a second mortgage, the lender will assess the value of your property and the outstanding balance on your primary mortgage.
A second mortgage is an additional loan on top of your existing mortgage, while a remortgage involves replacing your current mortgage with a new one, which may include additional borrowing. A remortgage can be used to get a better interest rate or to release equity, whereas a second mortgage specifically involves taking out a separate additional loan secured against your property.
Generally, lenders may allow you to borrow up to 75-100% of the property’s value, including the outstanding balance of your first mortgage. However the amount you can borrow with a second mortgage depends on various factors, including:
Second mortgages typically have fixed monthly repayments over a set term, usually between 5 and 25 years. The repayment terms can vary depending on the lender and the purpose of the loan. Some second mortgages may have an interest-only period initially, followed by principal and interest repayments, while others may require immediate repayment of both.
Taking out a second mortgage comes with certain risks. If you cannot to keep up with the repayments, your property could be at risk of repossession.
On top of that, if the property’s value decreases, you may end up owing more than your property is worth. If you find yourself struggling with repayments, you should reach out and get help before you end up trapped in a debt cycle.
If you have a second home that you let out as a rental property, you can generally deduct the mortgage interest as an allowable expense against the rental income. However, if the second home is for personal use only, you typically cannot deduct the mortgage interest. Consult with a tax advisor or HM Revenue and Customs (HMRC) to get conclusive advise.
Yes, if you have enough equity in your current property, you may be able to borrow against it to fund the purchase of a second property. The second mortgage would be secured against your existing property. The funds can be used as a deposit or towards the purchase price of the new house.
On average, it can take between two to six weeks to complete the process, but it can be longer in certain cases. Aim to start the application process well in advance of when you require the funds. The timeframe depends on the complexity of your application, the lender’s processes, and the required property valuation.
Yes, a second mortgage can be refinanced, just like a first mortgage.
To work this out, you should assess:
Yes, but lenders may have specific criteria and requirements for second homes, such as minimum deposit requirements and affordability assessments.
Yes, it is possible to get a second mortgage without involving your spouse. In joint ownership scenarios, both partners may not be required to be on the mortgage application. It depends on your agreement.
Yes, in most cases, leasehold properties are eligible for second mortgages.
