What factors affect second charge loan interest rates in the UK?
First off, you are of course only eligible for a second charge loan if you’re already a current homeowner (although you don’t have to live in the property you’re looking to secure the loan against - it could be a buy to let).
Interest rates are typically higher on second mortgages due to the added risk these products pose to lenders, so bear this in mind when calculating whether you will be able to afford the repayments.
The second charge rates you’ll be offered will completely depend on your situation and the lender, but there are a few factors that will play a role.
How much equity you have in the property
The main factor that impacts how much you can borrow, and correspondingly the rates you’re offered, depends on how much equity you own in your home. The sum varies by lender, but 75-100% of the total equity is a benchmark figure.
So, if your home is valued at £300,000 and you have a first mortgage of £200,000, you have £100,000 in equity - this is the maximum amount you would potentially be able to borrow.
Your individual circumstances can significantly impact how many providers are willing to loan to you and what 2nd charge loan rates you’re offered.
For example, a borrower with clean credit that requests to borrow an affordable sum at a low LTV will be deemed lower risk than someone with recent instances of adverse credit that is seeking to borrow to a high LTV.
In a nutshell, the lower risk your application, the best second charge loan rates you can expect.
How do I carry out a second charge mortgage comparison?
Lots of people turn to online calculators or comparison sites to find out what rates they can expect when taking out a second charge mortgage, but most experts will tell you this is not the best way to find the most favourable deals.
Not only are you likely to receive inaccurate quotes (online calculators very rarely factor in all your individual circumstances), you may end up tying yourself into a deal that later transpires to be unsuitable for your needs and circumstances.
For a reliable second charge loans comparison and access to lenders that are most suited to your situation, get in touch with a whole-of-market second charge mortgage specialist who can tailor a product search with your profile in mind.
How to get the best second charge mortgage rates
To get the most competitive rates on your second charge mortgage, the first step should be to approach your current lender to find out how much they would charge for an additional loan - some providers may offer existing customers special rates, although you should still seek specialist advice before considering their offer.
Don’t just settle for the first quote you receive: shop around. Compare different lenders’ annual percentage rate of charge (APRC) and loan term lengths. Scrutinise mortgage terms, fees and any look out for any hidden costs - but don’t do the legwork yourself.
The most efficient way of doing this is to seek advice from a qualified advisor. Not only will you save yourself the time and effort, the experts we work with have already arranged second charge mortgages for hundreds of happy customers.
Their wealth of experience teamed with whole-of-market access means you are guaranteed a loan with competitive rates that best suit your needs and financial situation.
Speak to a second charge mortgage expert today
For accurate, up to date advice, contact Online Mortgage Advisor. The specialists we work with will compare second charge mortgage loans and quote you the most competitive rates for your individual circumstances.
Call us for a free, no obligations chat on 0808 189 2301 or make an enquiry here and one of the team will be in touch.
*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA.Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes.
The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete's presence in the industry as the 'go-to' for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!
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