Second charge mortgages

A second charge mortgage lets you borrow against the equity in your home without disturbing your existing mortgage. It can be the cheaper option when your first mortgage has an early repayment charge — but it comes with its own costs and risks.

Last checked 13 September 2026. Editor: Kris · editorial standards

Six sections. Each anchored to a first-party source, checked 13 September 2026.

1. What a second charge mortgage is

A second charge mortgage (also called a secured loan) is a separate loan secured against a property that already has a mortgage on it. The original mortgage lender has first charge over the property; the second charge lender takes second priority. If the property is repossessed, the first charge lender is paid first from the sale proceeds; the second charge lender takes whatever remains. That additional risk means second charge rates are usually higher than first charge rates.

2. Regulation

Second charge mortgages on residential properties you own and live in are regulated by the FCA in the same way as first charge mortgages. A broker advising on a second charge must be authorised for that activity, and the same rules on disclosure of range of service and fees apply before advice is given (MCOB 4.4A). Check the broker and the lender on the Financial Services Register.

3. Second charge versus remortgage versus further advance

Option	What happens	When it suits
Remortgage	Replace first mortgage with a new, larger one	ERC period ending soon; better rate available
Further advance	Borrow more from your existing lender on the same property	Lender willing; no ERC; simpler process
Second charge	New loan, new lender, secured against the same property	Large ERC on first mortgage; or first lender won't lend more

A second charge typically makes financial sense when the early repayment charge on remortgaging exceeds the extra interest cost of the second charge rate over its term. A broker who can access all three options can model this properly.

4. What you can borrow

The second charge lender calculates the maximum loan from the available equity (property value minus outstanding first mortgage balance) and your income, using a standard affordability assessment under FCA rules (MCOB 11.6). Both the first and second charge monthly payments count as committed spending. Total debt against the property (both charges) is typically limited to 80–85% of the property value, though some lenders go higher.

5. Costs

Second charge mortgages carry higher rates than first charge products (the risk premium for being subordinate). They also typically include arrangement fees, valuation costs, and sometimes broker fees. The total cost of credit must be disclosed to you before you proceed; read the European Standardised Information Sheet (ESIS) for the precise figures.

6. Risk: both charges are secured on your home

Your home may be repossessed if you do not keep up repayments on either mortgage. Second charge lenders can apply for repossession independently of the first charge lender. Keep both payments factored into your budget. If your financial position changes, contact both lenders early: both are required to treat customers fairly and to consider forbearance options.

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General information, not advice. Mortgage Brokers List is a directory and a set of free tools. Only an FCA-authorised adviser can recommend a mortgage for your circumstances. See our editorial standards.