Second Charge Mortgage Debt High

Second Charge Mortgage Debt High.

The Finance and Leasing Association has released research suggesting that second-charge borrowing reached a four year high in October.

Second charge borrowing for the month of October 2013 hit £44m, up 25% on the same month last year.

What is a second charge loan?

• Sometimes known as a second mortgage.
• This is about priority on loans secured against your home.
• 1^st Charge - First in line, top priority, for repayment when a property is sold or re-mortgaged = usually your main mortgage
• 2^nd Charge - Second in priority of repayment and so on.

Why do people have second charges?

• Borrow additional money for home improvements
• Debt consolidation

Why are second charges on the increase?

People are reluctant to move.  People are improving their homes.  Others are of course trying to refinance debt on high credit cards and loans to lower rate “second mortgages”.

Are they safe?

Broadly speaking, we urge caution.  Arrangement fees can be high, interest rates will also be higher than 1^st charge mortgages. 

They are also secured on your property, whereas credit card debt is usually unsecured.  This means if you consistently do not meet the repayments, your home is at risk in the same way as if you do not pay your mortgage.

We suggest you have to compare the costs of second charge debt to either a full re-mortgage or in the case of debt consolidation, the savings on interest rate charged v additional debt now secured on your home.