Getting a second mortgage
Getting a second mortgage
If you’re a homeowner, you can take out a second mortgage. In fact, you can take out as many mortgages as you can afford - provided you meet the criteria laid out by your lender. We look at the reasons for taking out a second mortgage, the process and who is eligible.
What is a second mortgage?
A second mortgage is a secured loan of over £1,000 taken out in addition to the first mortgage, against the equity in your property.
As the name implies, a second mortgage will mean that you have two mortgages on your home. While you must be a homeowner to take out a second mortgage, you don’t necessarily need to live in the home you’re securing the loan against, it could be a buy-to-let property that you own.
Why do people take out a second mortgage?
You might want to get a second mortgage for a number of reasons, these include:
- Home improvements
- Debt consolidation
- Healthcare costs
How much will lenders be willing to offer?
The amount that you can borrow through a second mortgage depends on the equity that you have in your property. The sum lenders offer can vary, but between 75%-100% of the potential equity is a good starting point.
You’ll need to determine how much equity is in your current home (see below) and decide how much money you’d like to borrow against that value.
Whatever your reason for taking a second mortgage on your home, make sure that you understand the costs involved and are confident you can afford them - failure to make payments on your mortgage may lead to you losing your home.
How do I work out how much equity is in my home?
The equity is the value of your home minus the amount you owe on the first mortgage. For example, a home worth £200,000 with £100,000 remaining on the mortgage will give you £100,000 in potential equity for a second mortgage.
Are second mortgage interest rates higher?
Interest rates will often be higher on a second mortgage – and you need to consider this when you’re working out whether you can afford the repayments. If you think you might struggle to meet the repayments, it may be wise to reduce the amount you want to borrow, remortgage (the interest rates can be lower) or opt out of taking a second mortgage altogether.
Can I get a second mortgage to start a business?
The equity in your home that’s released by taking a second mortgage from some providers can be used to start a business. Before you consider taking out a loan against your property, consider these points:
- How much will opening your business cost?
- Is there a market for your business idea?
- Is it likely to remain profitable in the long-term?
- Will you need to hire an accountant, a bookkeeper or a solicitor?
- If you go into business, will you still be able to afford your mortgage repayments (remember that you will have two)?
Compare second mortgage rates
You can look for a second mortgage deal with our comparison service. Just enter a few details, then we’ll do the searching for you and provide you with a list of options that suit your needs.