Second Charge on Mortgage

Noobie2011

Hi All,

I am wondering if someone can help. I have a 2 year fixed ortgage which is up for renewal in October 2016.

I also have taken out a Second Charge on the Property which completes January 2019 although with the extra payments I am making to it it will likely complete around July 2017.

What I am trying to find out is when I renew my Mortgage how will the Second Charge affect me. Do I have to declare this to the new Mortgage place and will it help that I have a Second Secured Loan on the Property?

Thanks in advance for any help

silvercar

If you are staying with the same lender and moving to a new deal, the second charge won't effect you.

If you are moving to a new lender, the second charge holder will need to agree to a deed of postponement, to allow the new mortgage lender to take first place in the repayment order. So you will need to declare it and it may take slightly longer to get the mortgage put into place.

Noobie2011

silvercar wrote: »

If you are staying with the same lender and moving to a new deal, the second charge won't effect you.

If you are moving to a new lender, the second charge holder will need to agree to a deed of postponement, to allow the new mortgage lender to take first place in the repayment order. So you will need to declare it and it may take slightly longer to get the mortgage put into place.

The second charge Mortgage is not with the current Mortgage Lender if that makes any difference to your initial statement about staying with the existing Mortgage company,

So if I change to a new Mortgage Provider and need to agree to a deed of postposnment, do you mean the payments to the Second Charge would stop until the new Mortgage Lender is setup and their payments start. And in terms of declaring it, I presume you mean I would need to declare it to the new Mortgage Lender before they agree to the Mortgage. Would this likely increase the chance of them saying no as unlike this being say normal credit like a credit card etc this loan is secured on the property they are about to takeover?

ACG

If you move to a new lender for your main mortgage, the second charge would have to agree to you moving - if its £ for £ and straight forward remortgage then its unlikely to cause any problems, its likely just a tick box exercise.

If you stay with the same lender then nothing will happen at all.

The secnd charge will not help you in any way, but it could be neutral or negative depending on the rest of the case, whether it is affordable etc.

silvercar

Think of it as rungs on the ladder - it is the order that the sale money is used to repay the mortgage/ loans in the event of a sale or repossession - so your (main) mortgage has to have top space. Your second charge/ secured loan is behind it. If the mortgage is "moved" to a new lender what actually happens is the original mortgage is cleared and you take out a new mortgage with the new lender. This new mortgage would take its place on the ladder and be behind the secured loan/ second charge. That is obviously the wrong way round as your mortgage has to come first, so the secured loan company has to agree a deed of postponement to move it behind the new mortgage.

The second charge Mortgage is not with the current Mortgage Lender if that makes any difference to your initial statement about staying with the existing Mortgage company,

I didn't think it was.

So if I change to a new Mortgage Provider and need to agree to a deed of postposnment, do you mean the payments to the Second Charge would stop until the new Mortgage Lender is setup and their payments start.

It is the second charge lender that has to agree the deed of postponement. The payments carry on as normal, nothing has changed in your agreement with them.

And in terms of declaring it, I presume you mean I would need to declare it to the new Mortgage Lender before they agree to the Mortgage.

Yes, they would consider all your borrowing commitments as part of their decision on how much to lend you.

Would this likely increase the chance of them saying no as unlike this being say normal credit like a credit card etc this loan is secured on the property they are about to takeover?

As explained above, the second charge plays second fiddle to the mortgage, so its presence as a secured loan rather than a credit card isn't important. What is important to the lender is your ability to repay, and the fact you have other borrowing may limit the amount they will lend you.