Equity Release Second Charge – Guide to Hidden Costs

Are you wondering if an equity release second charge is possible? You’ve come to the right place for answers.  Every month, over 7,000 people visit our website to learn about equity release.

In this article, we’ll answer the following questions:

• What does a second charge mean?
• What is a second legal charge?
• What is the difference between equity release and releasing equity?
• How much money can you get through an equity release mortgage?
• Is equity release a second charge mortgage?

We know that equity release can seem difficult to understand, but don’t worry! We’re here to help you figure things out.

Let’s start learning about the reasons for equity release together.

What does 2nd charge mean?

A second charge is a second lien of credit secured by a property. 

For example, if you took out a mortgage to help buy a property, the mortgage debt would be the first charge on the property and a further secured loan taken out against the property later would be the second charge on the property. 

Interestingly, if a property had three liens of credit secured against it, the third loan that was secured isn’t usually called a third charge. It’s still known as a second charge. So you can only have one first charge, but you can have multiple second charges. 

What is a 2nd legal charge?

A second legal charge is another way of saying a second charge on a property. They are applied to the property to indicate outstanding debts that are secured by the property. 

Equity release explained

Equity release is an overarching term for lifetime mortgages and home reversion plans. These are two methods of borrowing for senior homeowners over 55 or over 65, respectively. 

Equity release plans allow homeowners to borrow some of their property value without having to make ongoing repayments. 

The debt is only repaid through the sale of their property. But the property is only sold when the last surviving homeowner dies or moves out of the property – often into an aged care facility. 

You can learn more about equity release plans by visiting this explanation guide on lifetime mortgages and home reversion. 

Equity release vs releasing equity

Equity release is sometimes confused with releasing equity. Equity release is a method of releasing equity only available to older homeowners. 

Whereas releasing equity is something homeowners can do at any age through a range of loans, such as home equity loans or home improvement loans. 

If you’re over 55, you might consider releasing equity with an equity release plan. 

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How much money can I get through an equity release mortgage?

Equity release lifetime mortgages typically allow the homeowner to access between 20% and 60% of their property value. The percentage of equity you can access in a lifetime mortgage will depend on the property, your age, and the equity release company. 

There are some equity release schemes that can allow you to borrow more, sometimes as much as 100% of the property value. 

Is equity release a second charge mortgage?

No, an equity release plan like a lifetime mortgage can never be the second charge on the property. 

To qualify for equity release you must meet several criteria, including being above a certain age and owning your home outright. If you own your residential home outright, there is no existing mortgage or other loans secured against the property. So any eventual lifetime mortgage would become the first charge on the property. 

However, if you release equity with a home equity loan or equivalent, these loans are also known as second charge mortgages. 

Can you do equity release twice?

You can do an equity release twice but you can never have two equity release plans at one time. You would need to clear your first lifetime mortgage before you could be considered for another.

There is more than one reason why you can’t have two lifetime mortgages at once:

1. Equity release plans must be the first and only charge on a property
2. Equity release plans must only be taken out on your residential home

» TAKE ACTION NOW: Find out how much equity you could release

Can you get a second charge on a property with equity release?

No, you cannot take out a second charge on your residential property if you have already taken out a lifetime mortgage or home reversion plan. 

Equity release plans can only be the only lien of credit against your home, so you won’t be allowed to add further debts to this property. But you might be able to borrow against the equity in another property you own. 

Can you remortgage a lifetime mortgage?

It’s possible to remortgage a lifetime mortgage. You might do this if you want to secure a lower interest rate on the lifetime mortgage or secure better equity release terms. 

To remortgage a lifetime mortgage, you would need to secure a new equity release plan against the property with the funds used to clear the first lifetime mortgage and any early repayment costs, which can be significant depending on how long ago you took out the lifetime mortgage.

If your home has gone up in value, you might be able to remortgage a lifetime mortgage and borrow additional funds. 

How much could I save by switching to a new equity release plan?

Switching to a new equity release plan has the potential to save you thousands of pounds, depending on the rate you switch to and how long you end up holding your lifetime mortgage. It’s best discussed with an equity release adviser. 

You might also like – equity release interest rates!

If you enjoyed this guide, you may also want to know about the latest equity release interest rates. Find out what is and isn’t a competitive rate with us, and learn how compounding interest really works.