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Finding The Best Second Mortgage Rates This Year

Scott Nelson MoneyNerd Janine Marsh MoneyNerd
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Scott
Scott Nelson MoneyNerd

Scott Nelson

Debt Expert

Scott Nelson is a renowned debt expert who supports people in debt with debt management and debt solution resources.

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&
Janine
Janine Marsh MoneyNerd

Janine Marsh

Financial Expert

Janine is a financial expert who supports individuals with debt management, cost-saving resources, and navigating parking tickets.

Learn more about Janine
· May 26th, 2024
Looking for a loan? £5,000 to £2.5 million available, compare deals below.

How much do you want to borrow?

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Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable

Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable

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Best Second Mortgage Rates

Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable

Understanding second charge mortgage rates can seem tricky. Don’t worry; you’re in the right place. Every month, over 6,900 people like you visit our website seeking advice on secured loans. 

In this easy guide, we’ll explain:

  • What a second charge mortgage is.
  • The real cost of a bad second charge mortgage.
  • The difference between a second charge and a second mortgage.
  • The amount you can borrow with a second charge mortgage.
  • How to get a free quote for a second charge mortgage.

In May 2022, over 2,800 homeowners took out second charge mortgages, marking a significant 43% increase from May 2021.1 This highlights the importance of being well-informed when making such financial decisions.

We understand that you might be worried about the specifics of a second charge mortgage, but you’re not alone. We’re here to help you with clear, simple advice. 

Get your second charge mortgage deals

Answer the questions below to compare deals – won’t affect your credit score.

How much do you want to borrow?

Search powered by our partners at LoansWarehouse.

Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable

What is the current interest rate for second mortgages?

Interest for second home mortgage rates can vary from as low as 2% to 20% and more.

Securing a second charge mortgage with an interest rate between 2 to 7% is considered good at the time of writing and subject to change.

You’ll need to prove the loan is affordable and have an excellent credit report to get the best second mortgage rates. 

Are the rates higher?

Second charge mortgage rates are usually higher than the interest rate you were offered on your first charge mortgage.

The main reason is that having the first charge means you have more debt and a greater lending risk. It will be harder to satisfy affordability tests with more considerable existing debt. 

However, the second charge interest rate will be determined by personal circumstances and your credit score, which may have improved since taking out your first charge mortgage. 

Second Charge Mortgages vs Remortgage

Homeowners exploring financing options often consider second charge mortgages and remortgages. In this table, we’ll compare these alternatives to help you make an informed decision.

Factors Second Charge Mortgage Remortgage
Ease of Approval Varies, but generally easier for those with existing mortgages Depends on current financial status and may be easier for those with good credit history
Risk Higher, as it is secured against home equity Varies, can be lower if it consolidates debt or secures a better rate
Likely Costs Potentially higher due to additional fees and higher rates Varies, can be lower if securing a better interest rate
Interest Rates
Typically higher than standard mortgages Depends on credit score, can be lower for good credit
Eligibility Criteria Less stringent, designed for individuals with adverse credit history More stringent, based on current financial stability and credit history
Equity Requirement Requires sufficient equity in the property Requires equity, but usually involves replacing the existing mortgage
Impact on Credit Score Can improve if managed well, but risky if defaults occur Generally positive if managed well and debts are consolidated

Change the amount you are looking to borrow to see what offer you could get

£

Lender

APRC

Monthly payment

Total amount repayable

United Trust Bank Ltd

5.99%

£218.73

£26,247.92

Pepper Money

6.86%

£220.24

£26,429.17

Together

6.95%

£220.40

£26,447.92

Selina

7.5%

£221.35

£26,562.50

Equifinance

7.7%

£221.70

£26,604.17

Spring

10.5%

£226.56

£27,187.50

Loan Logics

11.2%

£227.78

£27,333.33

Evolution

11.28%

£227.92

£27,350.00

Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable.

Search powered by our partners at LoansWarehouse.

How to find the best second mortgage rates

It would be best to do extensive and meticulous research to find the best mortgage deals with the lowest interest rates.

The UK has a broad second charge mortgage market with banks, building societies and mortgage specialists providing these types of secured loans

For second mortgage affordability, before starting your research, you should research these products extensively and seek commercial or free finance advice first.

You may use comparison websites for a second mortgage comparison, or you can enlist a mortgage broker’s help to search the market and secure your loan.

These groups and professionals may secure you a better deal than if you were searching alone, but that is not guaranteed, and they may charge for financial advice on second mortgages.

Using second charge mortgage calculators can help you uncover the best mortgage rates. From my experience, these online tools are inaccurate for almost 50% of users, so take them with a pinch of salt.

» TAKE ACTION NOW: Compare deals from the UK’s leading lenders

Best second mortgage lenders

The best mortgage lenders with the best second mortgage rates hinge on personal finances and credit history.

No one lender offers the best-guaranteed rate, but some provide lower representative rates than others, which may not be the rate you’re offered. 

Remember to only apply to FCA regulated second charge lenders that are authorised and regulated by the Financial Conduct Authority and are listed on the Financial Services Register. 

What are the fees?

Taking out a second charge is not like taking out unsecured loans.

Depending on your lender, you may need to pay additional second mortgage fees and costs. It would be best if you considered these as well as seeking the best second mortgage rates.

  1. Arrangement fee

The arrangement fee is a common charge applied to most second mortgages. It is somewhat of an administration cost to arrange and set the loan. But the cost may be spread over the lifetime of your monthly payments. 

  1. Appraisal costs

To determine how much you can borrow, the lender needs to know your equity. And to do this, an updated property valuation could be required. The homeowner may pay a fee to work out the latest valuation, known as an appraisal cost. Some lenders do not charge this fee. 

  1. Closing costs

Closing costs are applied to most first charge mortgages, second home mortgages and second charges. It is a fee to close the loan at the end of the repayment term when all monthly payments have been made. The fee can range from 2-5% of the total loan amount. 

  1. Early repayment fee

Some homeowners decide to pay off their second charge earlier than agreed. To do so, they might have to pay an early repayment charge which is similar to the expense of closing costs. This fee may also be payable if you switch your second charge to a different deal, like remortgaging a first charge. 

Second charge mortgage for all purposes

  • Stuck paying high interest on credit card debts & loans?
  • Looking to fund a home improvement project?
  • Dreaming of finally taking the once-in-a-lifetime trip?

Polly

“This was by far possibly one of the nicest experiences I’ve had getting a secured loan.”

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Is a second mortgage a good idea?

A second charge can be a very good idea for homeowners requiring large amounts of credit and are seeking a competitive interest rate within the secured loan market.

Some people believe they are a bad idea because not keeping up repayments on your mortgage means your home may be repossessed. 

Although losing your home is possible, many people borrow responsibly and avoid such issues. 

Can I get a second mortgage interest only?

Interest-only second mortgages don’t exist because no second charge only requires you to pay back the interest and none of the capital. However, some equity release products do this. 

A HELOC is the closest thing to an interest-only second mortgage.

It is a type of home equity loan that provides the loan over a draw period as the homeowner requires. Throughout this draw period, only (variable) interest is payable.

But once the draw period finishes, the homeowner must pay the loan amount back plus interest. 

Interest deduction news update

If you use a second charge to buy a rental property with a buy-to-let mortgage, be aware that you can no longer consider interest payments on any mortgage as tax-deductible on rental properties.

HMRC closed this loophole in April 2020 and has replaced it with a tax credit system for landlords. 

The good news is that basic rate taxpayers can still receive a 20% tax credit, resulting in no difference for them and their tax bill.

But wealthier higher rate taxpayers at 40% will not benefit from the new system.

It has never been possible to claim any second home mortgage interest payments as tax-deductible when the second home is being used as a holiday home or second residential property rather than a rental investment. 

Get your second charge mortgage deals

Looking for a loan? £5,000 to £2.5 million available, compare deals below.

Loan

Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable.

Search powered by our partners at LoansWarehouse.

References

  1. Finance & Leasing Association – Second charge mortgage statistics
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The authors
Scott Nelson MoneyNerd
Author
Scott Nelson is a renowned debt expert who supports people in debt with debt management and debt solution resources.
Janine Marsh MoneyNerd
Financial Expert
Janine is a financial expert who supports individuals with debt management, cost-saving resources, and navigating parking tickets.