Second charge mortgage - changing deals?

anonandy

Hello,


We are looking to take out a second charge mortgage as a secured loan to carry out some home improvements.


The broker seem to have never called it a "second charge mortgage" throughout the process, and now we've received the paperwork - and are now in our reflection period before we sign - it's showing mortgage deeds, second mortgage paperwork etc etc... we thought this was just a loan which was legally secured against our house, not a second mortgage!


I can now see online more about second charges and understand it... but I'm failing to find one answer: will we be okay switching our mortgage deal when our fixed rate ends in October? We plan to stick with our current lender but I'm worried if we have a second charge mortgage it might change things/cost us a lot if we have to move lenders and get revaluation, solicitors involved etc...


I'm sure the broker will tell us the rose tinted answer of the question as they want their £1,600 arrangement fee(!), and I'm sure Halifax will be useless as ever on the phone when asked the question. So maybe some MSE experts could give their advice?




Just to put into context some numbers in case it helps, it's a loan of £16,000 on a property with a £220,000 mortgage which is worth £290,000.


Many thanks,
Andy

Thrugelmir

Charges on a property (mortgages) are ranked. Primary mortgage loan lenders will require a 1st charge. This means there'll be repaid first. Second charge lender potentially may not be repaid in full.

Have you considered approaching your existing lender for a home improvement loan?

anonandy

That is what I've found online, indeed.


What I can't find out is would there be any complication when I want to change my mortgage deal in October?


Our current lender can't offer favourable rates.

getmore4less

Why not change the lot now if your current lender does not have good rates.

Which lenders and what rates are you getting?

anonandy

My current mortgage is 1.2%, they would loan me an unsecured loan at 9.5% or a secured loan at 9%... the loan we've gone for is 7%.


We are not interested in changing our deal until October, as we'll just incur unneccesary charges and lose equity (which is my priority on this house, increasing equity).


I'm only interested in knowing if having a second charge complicates switching deals when fixed rates are up.

huffy12334

Having a second charge is one of the worst things we ever did. Anything you do from the time you take it needs a solicitor, so even if you decide to borrow more, re-mortgage, move, sell, you will have to pay fees in excess of £500 for a solicitor to write a letter for you. If you have other options go for it, don't secure a loan against your house as it isn't as rosy as they make it seem.

TrickyDicky101

Having the second charge will definitely complicate matters if you want to switch lenders when you come out of your current mortgage product (ie when the fixed term expires). It may not matter so much if you intend to stay with your current lender.

ACG

A loan secured a property title is a mortgage.
This particular loan sits behind your Halifax mortgage, which makes it a second charge mortgage. Your Halifax mortgage/loan being the first charge.

They can be referred to as:
Secured loan,
Second charge loan,
Second charge mortgage.

They are all the same thing.

If you want a loan that is secured against your home, that is what it seems like you have.

kingstreet

A secured loan can be a good way of raising money now when unable to remortgage due to eg ERCs.

Often the secured loan is penalty-free so you can repay it when you remortgage without it costing you.

getmore4less

You need the money till Oct when you can switch or are you planning to keep it going longer.

£16k 7% or 9.5% that's a max of £400 a year extra interest.

£1,600 in fees pays that extra interest for 4 years.

You also have the option of looking at cheaper money on CC with 3% fees to save loads more in interest

djphig

You should be fine if you are doing a simple product switch with your existing lender. If you plan to do a whole re-mortgage to a different lender, it is very likely you will have to pay off the second charge (secured loan) with the new remortgage. If that is not what you want to do, your new mortgage company will have to write to the 2nd charge company to ask "consent" from them to place their charge on your property. Some second charge lenders won't allow it.

FYI to the person who posted above - it is less than 20% of cases where you need a solicitor to be involved with the application.

I am a 2nd charge mortgage advisor - feel free to ask any further questions!