It might seem counterintuitive with the state of the world at the moment, but there are a growing number of homeowners who are opting to take out a second mortgage on their home. A second charge mortgage effectively sits on top of your existing mortgage. This type of loan allows you to use any equity you have in your home as security.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
You can usually find second charge mortgages from any number of specialist firms. But remember, it means you’ll have two mortgages on your home, even if the existing mortgage always take precedence over the second.
According to the Financing & Leasing Association, second charge mortgages are experiencing an uptick in popularity.
Totalling £133m, just over 2,800 mortgages were taken out by homeowners in May of this year alone. Compared to May 2021, that’s 43% higher by number, and 53% higher by value — a significant jump either way.
Many people are using the money from the loan to pay off other debts with higher interest rates like credit cards or personal loans. While others use it to pay for home renovations or even things that have nothing to do with the home, like paying for a wedding or starting their own business.
There are other options if you need some extra money such as remortgaging or depending on the circumstances and amount, a personal loan.
But if it doesn’t make sense to remortgage — like if you have a really good deal currently or have just recently signed on for a five or ten year fixed rate deal and if a personal loan is not a good alternative, a second mortgage could be the solution.
These are typically the option chosen by those who are self-employed, because they struggle to obtain access to unsecured borrowing.
It is, however, a major financial decision. Before you make a decision, get in touch with a trusted adviser from Dental & Medical Financial Services. We can talk more about second charge mortgages to help you decide if they might be the right move for you or help you find the best path for you.