How do Soft Second Mortgages Work? Complete Guide

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

How does a soft second mortgage work? If you’ve heard about a soft second mortgage as a way to fund a house deposit, you probably want to know more. We’ve explained the details of a soft second mortgage in this quick post.

What is a soft second mortgage?

A soft second mortgage is a small second mortgage used to cover either a downpayment of a property purchase or the closing costs of a mortgage.

This type of mortgage is supposed to help people who are struggling to get onto the property ladder but do have a regular income, or those who are going to struggle to pay significant closing costs at the end of their mortgage.

But using them is not simple and might not even work.

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

Search powered by our partners at LoansWarehouse.

How does a soft second mortgage work?

A soft second mortgage works by providing the buyer with a small lump sum to use as a downpayment or to cover closing costs. However, the repayment schedule for this loan is deferred until a later date, meaning monthly repayments are not required for some time.

The soft second mortgage should be disclosed to a lender when applying for a mortgage.

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?

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

Compare deals

Reviews shown are for Loans Warehouse. Search powered by Loans Warehouse.

Is it the same as a silent second mortgage?

A silent mortgage is similar to a soft second mortgage but they are not the same – and they are more common in the USA.

A silent mortgage is when a buyer uses a mortgage to fund the downpayment on a property but does not disclose this smaller mortgage when applying for their main residential mortgage.

The lender believes the buyer has saved this money for the downpayment themselves, but in fact, they have borrowed it from a silent mortgage provider. Not disclosing existing debts to the mortgage provider is illegal.

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

Should I use a soft second mortgage?

Soft second mortgages can complicate your finances and they should only be considered with the support of a professional mortgage adviser. They are more appropriate and successful to help pay off closing costs rather than used to fund a house deposit, which is not likely to work.

Head back to MoneyNerd soon for more information on buying property and the different types of mortgages!