Are There Different Kinds Of Second Mortgage?

Most second mortgages work like first mortgages – you are provided with a single lump sum payment, which you repay on a fixed schedule.

However, a limited number of lenders also offer a different type of second mortgage, which effectively provides you with a line of credit.

This type of second mortgage allows you to gradually withdraw the money as you need it – at different stages of a house extension, for example, or maybe to make several large purchases.

It's even possible to get a "second mortgage in excess" – a very high-risk type of secured loan that takes your loan-to-value ratio above 100% - in other words, the mortgages you have secured on your home are worth more than the property itself.

To be honest, it is probably best to avoid this situation if you possibly can – and you will need a very good credit rating to even be considered by lenders.

Most people don't need loans like these, but if you think that one of these types of second mortgage may be suitable for you, a mortgage broker will be able to explain the choices you have.

Which Lenders Provide Second Mortgages?

Second mortgages are available from a variety of lenders – ranging from specialist loan companies to regular high street mortgage lenders.

The terms and conditions on offer – such as fees, interest rates and repayment schedules – can vary widely, so it pays to shop around before you decide on a deal.

Things You Should Know About Second Mortgages

Second mortgages are considered riskier than first mortgages by most lenders. Consequently, the terms and conditions are sometimes a little more restrictive, and the interest rates are normally higher.

Here are a few things you should consider before you agree to a second mortgage:

• What are the early repayment fees?

• What would happen if you had to sell your home – could you pay off the second mortgage, or would you need to re-secure it on your new home? Either way, what would the fees be?

• Can you make overpayments, or take payment holidays if you need to?

• Would remortgaging be a better option? If you can, you will probably get a lower interest rate this way

• Do you need payment protection insurance? If so, make sure you shop around. You will probably be able to find cheaper insurance than that offered by your second mortgage lender.

Remember: Just like your first mortgage, your second mortgage is secured on your home. If you fail to keep up the payments on a second mortgage, your house could be repossessed even if you are not behind with your first mortgage.

Read On

What Are Second Mortgages?

Why Would I Want A Second Mortgage?

How Do Second Mortgages Work?

Are There Different Kinds Of Second Mortgage?

Which Lenders Provide Second Mortgages?

Things You Should Know About Second Mortgages

Second Mortgages: Frequently Asked Questions

Second Mortgages - UK Guide