Second Charge On A Buy To Let Property

Second Charge on a Buy to Let Property

What is a Second Charge Loan?

Second charge loans are often referred to as second mortgages because they have secondary priority behind a main mortgage. They are usually used to raise additional money against the equity in a property when it’s not possible or desirable to increase the first mortgage.

What a second charge loan allows you to do is use some of the remaining equity in your home as security against an additional loan. Essentially, it means that you have two mortgages on your buy to let property.

Why a Second Charge Loan can be useful

Instead of remortgaging a property, by taking out a second mortgage on your buy to let mortgage you can retain your current arrangements for your buy to let mortgage so you would not need to pay early repayment charges if applicable. In addition to this, second charge loans can be taken out on shorter terms, which can save you money from interest accumulation.

If you are an investor who has an adverse credit rating, then a second charge mortgage is likely to be more readily available to you than a standard buy to let loan. Landlords can also benefit from lower interest rates than personal loans due to the lender having the security of the property placed on the loan.

However, it’s worth noting that a second charge mortgage still means that you are risking your home should you fail to keep up with the repayments. If you decide to sell your home, all of the money made from the sale would have to go towards clearing your first mortgage before it can contribute towards paying off your second charge loan.

What can I use a Second Charge loan for?

There are no limitations as to how you use the money raised from a second charge loan on, providing that it is legal and not intended for commercial reasons. Typically, buy to let investors take out second charge mortgages in order to pay for refurbishments, purchasing additional properties to add to their portfolio and consoling debt.

If you would like advice on second charge loans on buy to let properties or any other aspects of mortgages, why not call us today on 0117 403 4474. Alternatively, you can fill in our online enquiry form to request a call back, and speak to our specialist buy to let mortgage team with a free initial consultation.