Mortgage Advisers Should Look Again at Second Charges

As a specialist finance broker I spend a great deal of time talking to mortgage advisers about when a secured loan – more commonly called a second-charge mortgage – might be the right option for their client. These products are not always well understood, yet they can be a valuable tool in the adviser’s kit when remortgaging or a further advance is not possible or practical.

A second charge mortgage simply sits behind the first charge lender. For example, if a client already has a mortgage in place but needs to raise additional funds, and their lender will not agree, or the cost of remortgaging is prohibitive because of early repayment charges, a second charge can provide the solution. Clients look to raise money for many different reasons – home improvements, consolidating debts, paying a tax bill or covering school fees. A second charge allows them to do that without disturbing their existing mortgage.

There are even products available that allow a simultaneous second charge on completion. Many homeowners want to make changes to their property as soon as they move in, such as fitting a new kitchen or bathroom. Rather than taking out unsecured borrowing, they have the option of arranging a secured loan at the same time as completion.

Not every case is straightforward, of course. If a client has had mortgage arrears, their first charge lender may not be willing to give consent for additional borrowing. In these cases, some second-charge lenders will accept an equitable or unilateral charge, which allows the loan to proceed without that consent.

One of the strengths of the second-charge market is its flexibility. Fixed rates can be tailored over two, three, four or five years to run alongside the client’s first-charge arrangement. Rates are lower now than they were in the aftermath of September 2022, though they will always depend on individual circumstances. In terms of affordability, there are products that will allow borrowing at up to six and a half times gross income, which is often higher than what is available in the first-charge market. The ability to make overpayments adds further flexibility.

It is worth emphasising that clients rarely set out wanting a second charge mortgage. What usually happens is that they have a borrowing need that their first charge lender cannot meet. That is where the adviser plays such an important role. Having the knowledge, and the right specialist partner, means advisers can consider every option and ensure the client reaches the right outcome.

At Truffle, we see ourselves as an extension of the adviser’s team. We work closely with brokers, guiding them through how second charges work, what to look out for, and what products are available. We are here to share knowledge, to give advisers confidence, and to help them keep hold of their clients. In many cases, the service provided on a second charge can also generate referrals, strengthening the adviser’s business in the long run.

Ultimately, secured loans exist to deliver the right outcome. By understanding how they work, advisers can make sure their clients have every option on the table – and that is what good advice is all about.

Sarah talks about this and more in the Cornerstone Finance Group podcast episode Secured Loans: When to Choose a Second-Charge Mortgage. Listen to the podcast here.