A second charge mortgage is a secured loan that uses the capital (or equity) in your home as collateral. A second mortgage is completely separate to your original mortgage, and can be a good way to access extra funds without remortgaging. However, it will mean you have two mortgages to pay off on the property.

What are first and second charge mortgages?

A normal residential mortgage, where you borrow money to buy the home you live in, is a ‘first charge mortgage’. A second charge mortgage is an additional mortgage on the same property.

Can a mortgage company refuse a second charge?

In short, yes. A mortgage lender can and will refuse to allow a second charge to be registered against their security, your property, if they believe that by giving consent it will increase the risk of them making a loss on sale if they repossess the property.

What is the difference between first charge and second charge?

The lender for whom charge over assets is first created is called the holder of “first charge”. Where a second loan is backed by the same assets on which a first charge already exists, the subsequent charge holder is called “second charge”.

Can I have 2 residential mortgages?

It is not illegal to have two residential mortgages; you can have as many mortgages as you like on as many properties. Other lenders may put the interest rate up or insist you switch to a buy-to-let mortgage. Your lender didn’t so you don’t need to worry.

What credit score is needed to buy a second home?

Lenders will examine your credit score to make sure it meets their standards, which vary. Fannie Mae set the minimum credit score of 640 for a second home as long as there is a down payment of 25% or more, which is higher than the 620 minimum for a primary home. Debt-to-income ratio.