When a client needs to support a family member, a second charge mortgage can release property equity to cover major expenses.
Enterprise Finance Blog
A second charge mortgage can be used to release equity to invest or use elsewhere for things like:
There are many reasons why brokers would recommend a second charge mortgage. One of them is to help their clients protect their exisiting first charge mortgage. A second charge can unlock the required funds and leave the first charge they have untouched. There are 3 key situations:
Historically, second charge mortgages were considered for sub-prime. Impaired credit does continue to be a reason to consider a second charge loan, but in a different sense.
A mortgage broker approached Enterprise Finance with a client who wanted to raise £30,000.
The client’s main residence was valued at £480,000 with an oustanding mortgage of £280,000 on an interest only basis. The current monthly mortgage repayment was £758.
The client applied to his existing lender for a £30,000 further advance. The lender agreed but insisted on the entire balance being switched to repayment. The effect of this was a new potential monthly mortgage repayment of £1,511.