Is it possible to take out a second mortgage these days?

mortgagequery

I remember when I was a kid, my parents took out a second mortgage on their home, with a different lender to the primary mortgage, and the second lender took a 'second charge' on the house.

Will any mortgage lenders offer second mortgages these days? We would like to build an extension to our house at a cost of 60,000, in addition to the existing 300,000 mortgage we have with Abbey. We're hoping to use borrowing from a new lender to make overpayments on the original to bring that down to 220,000, thereby needing 140,000 on the second mortgage. It may be though that we are stuck with the 300,000 existing loan, so would need 60,000 for the new borrowing.

The flat is conservatively valued at 500,000 at the moment and would be worth at least 600,000 with the extension, so the total would be 72% loan-to-value on the current market value (44% Abbey, 28% new lender), and 60% LTV total on the finished value.

Oh, and we'd need to get a rate substantially lower than 5.69% on the new borrowing to make it worthwhile.

Thanks so much in advance for any thoughts you can offer.

herbiesjp

Simple answer is yes yo can get a second charge mortgage.

It will not be a high street lender

And it will not be at high street rates.

Surely you can go to Abbey and ask them for a further advance in order to do the work - that would be your first port of call.

mortgagequery

Thanks, I agree it's easiest, but not necessarily cheapest to talk to Abbey. They would charge 4.99% on the further advance. The question we're grappling with is whether to throw 11000 in the bin to end our five year fix 3 years early, to get a more competitive rate than the 5.69% we're currently paying. But as you say, we're not likely to get a second charge mortgage for much less than 4.99% anyway. I reckon we could borrow at 3.79% if we start from scratch though, so the mathz over two years suggests we'd be better off doing that.

Can you suggest any suitable lenders to talk to?

Thanks!

theartfullodger

Just remember the last time the conservatives came to power, interest rates hit 17% quite fast....and stayed high for some years...

Conrad

A second charge will likely be in the region of 12 - 18%.

The low rates you cite are only possible by complete remo or swapping to another deal with Abbey and packing the penalty.

My instinct is the best option may be a simple further advance from Abbey. £11k is a massive oenalty plus there would be other costs and interim interest so your total will be c£13k to extract from current deal.