Can I Get a Second Mortgage on My House?

Considering getting a second mortgage on your house? A second charge mortgage could be a viable solution. This type of secured loan allows homeowners to borrow against the equity in their residential property without affecting their primary mortgage.

Learn more about what getting a second mortgage on your property means and how a second charge can help meet your personal needs, from renovations to consolidating debt.

A second charge mortgage is a secured loan taken against the equity of your residential property, sitting behind your primary (or first charge) mortgage in priority. This means that in the event repossession, the first charge lender will be repaid first and the second charge lender will be repaid afterwards, using the remaining equity left over after the first charge is settled.

A second mortgage offers a way to access funds by leveraging the equity you've built up in your home, without disrupting your existing mortgage. This is possible as the second mortgage operates alongside but separate from the first mortgage. It’s with a different lender, has its own rate and its own terms.

Whether you can obtain a second charge mortgage depends primarily on 2 key factors: your affordability and the amount of equity you have in your property.

Key aspects of affordability assessment include:

• Income: your total income, including salary, bonuses and other sources of income will be evaluated to ensure you have sufficient funds to cover the new loan payments
• Expenditure: lenders will review your monthly outgoings, such as existing debt repayments, household bills and living expenses to understand your financial commitments
• Credit history: a good credit history demonstrates your reliability in repaying debts, which can enhance your chances of securing a second charge mortgage and a more competitive rate
• Debt-to-income ratio: this ratio compares your total monthly debt payments to your monthly income. A lower ratio indicates a healthier financial position and greater affordability for additional borrowing

Equity is the portion of your property that you own outright, without a charge secured on it. It’s calculated as the difference between your property's current market value and the outstanding balance on your first charge mortgage.

The amount of equity you have plays a crucial role in determining your eligibility for a second charge mortgage.

The second charge mortgage lender will consider the following:

• Your home’s current market value: an up-to-date valuation of your property is required to assess the total available equity. You’ll have to pay for this but the lender will have certain requirements for the valuation – it may even be a simple desktop valuation
• Your outstanding mortgage balance: the remaining balance on your first charge mortgage will be deducted from the market value to calculate your equity
• The LTV (loan-to-value): lenders typically offer second charge mortgages up to a certain LTV ratio, which combines both the first and second charge mortgages. For example, if your property is valued at £300,000 and you have £150,000 remaining on your first mortgage, with a second charge lender offering a combined LTV of 85% (£255,000) you could potentially borrow up to £105,000 (£255,000 - £150,000) through a second charge mortgage

Obtaining a second charge mortgage depends on both your affordability and the amount of equity in your property. Lenders will assess your financial capability to manage additional loan payments on top of your existing mortgage payments and the equity available in your property to secure the loan. If you meet these criteria, a second charge mortgage can be a viable way to access additional funds without disrupting your existing first mortgage.

• You want to make home improvements and renovations: second mortgages are ideal for funding significant home upgrades or extensions that can increase your property's value
• You want to consolidate debt: you can combine your debts into a single, manageable loan with potentially lower interest rates and monthly payments
• You have major family expenses: a second charge is useful for covering major costs such as funding private education, significant family events, or medical bills
• You want to invest in property: second charge deals can be used to raise funds for investing in additional property or refurbishments

Yes, it is possible to get a second mortgage on your property, often referred to as a second charge mortgage. However, your individual eligibility depends on your affordability and the equity you have in your property. Essentially, your affordability and equity must meet the lender’s criteria for the kind of mortgage you want. Criteria vary from lender to lender so note that there are a variety of options depending on your situation.

Here are the basic steps you can follow to get a second mortgage on your house.

1. Assess your equity: determine how much equity you have in your home as this will affect the amount you can borrow
2. Conduct a financial review: carefully evaluate your financial health and the affordability of taking on additional debt
3. Seek professional advice: consult with a mortgage broker like John Charcol to understand the best options and implications for your specific circumstances
4. Compare offers: research various lenders to find competitive rates and favourable terms. Your mortgage broker will help you do this