Second charge mortgages, often simply referred to as second mortgages, are a secured loan used to raise extra money instead of remortgaging or taking out a personal loan, but you knew that. Right?
If your answer is yes, then you are in the minority. A new survey from specialist lender Together has found that three quarters of consumers do not know what a second charge mortgage is, resulting in homeowners missing out on a potential source of finance.
Of the minority who were aware what a second charge mortgage was, 23% did not understand the difference between this and a remortgage.
Despite the changes in the regulation and promotion of second charge mortgages following the Mortgage Credit Directive (MCD), it appears that many homeowners still are not aware of the second charge offering.
Pete Ball, chief executive of personal finance at Together, said: “For some, a second charge mortgage will be a better option than a remortgage, so it’s surprising that so many consumers are unaware of what they are and how they work.
“Following the changes to the second charge industry as a result of the MCD, brokers are now required to put forward second charge as an alternative option to remortgaging, but there needs to be greater public awareness of what a second charge mortgage means.”
Together has seen continuing demand for this kind of loan, particularly when it comes to funding home improvements, and this could potentially increase further in light of Brexit, according to Ball.
He added: “In the research we recently carried out we found that almost a fifth were less likely to move house as a result of the decision to leave the EU, although 35 per cent were planning some home improvement in the coming year, and second charge mortgages are ideal of this purpose.”