Second charge mortgage or remortgage?

If you own your home and need to raise money, there are two main routes: a second charge mortgage, which is a separate secured loan sitting behind your existing mortgage, or remortgaging, which replaces your current mortgage with a bigger one. A third option, a further advance from your existing lender, sits alongside them.

The two routes differ in cost, speed and risk. Second charge mortgages are priced higher than first mortgages because the lender is second in line to be repaid, and the FCA's 2014 consultation put typical rates at between 13% and 18%¹. Remortgaging usually gets you a first-charge rate, but if you are inside a fixed or tracker deal you may have to pay an early repayment charge to leave it, and Which? reports these can add up to tens of thousands of pounds².

The choice usually turns on three things: how much you need, whether your current deal has an early repayment charge, and how your credit file looks. Around two thirds of second charge mortgages are used for debt consolidation, according to the FCA¹.

How a second charge mortgage works: a secured loan behind your mortgage

A second charge mortgage is a secured loan that lets you use the equity in your home as security for the lender⁶. It works like a first mortgage in that your home is on the line, but the lender's claim ranks behind your existing mortgage. If you fail to keep up repayments and the home is sold to pay off debts, the first mortgage is cleared first⁷.

That ranking is the reason the pricing differs. The second charge lender only gets paid after the first lender, so it takes more risk and charges more. Second mortgages also tend to run for shorter periods than first mortgages, for example 5 or 10 years⁴.

You may also see these described as homeowner loans or second charge mortgages, which are the same thing under different names⁸. A secured debt consolidation loan works in the same way as a second mortgage⁹.

One structural point matters if you are weighing this against remortgaging. A further advance from your existing first mortgage lender may mean losing a preferential interest rate or paying early repayment charges, which is one reason borrowers look at a second charge instead¹.

Remortgaging to borrow more: equity, loan to value and credit checks

Remortgaging means switching from one mortgage to another, either a new deal with your existing lender or a new mortgage with a different lender¹⁰. When you borrow more at the same time, you are releasing equity: taking a lump sum from the value of your home¹¹.

Lenders assess this on your credit file, the value of your house and how much you want to borrow¹¹. Credit checks are often as important when remortgaging as they are for first time buyers¹². If your home has fallen in value, or your financial position has worsened, remortgaging may not be an option¹³.

The amount you can borrow against the property is set by loan to value, so a bigger loan against the same value pushes you into a higher LTV band. If you are moving to a more expensive property and need to borrow more, you will need to pass your lender's affordability checks and may have to pay a fee to increase your loan, or take on another mortgage product at a different rate².

There are scheme-specific rules in some cases. Under Help to Buy - Wales, if you remortgage without increasing your borrowing, the new first charge mortgage must be a repayment mortgage (interest only is not permitted), the new lender must be a qualifying lending institution registered with the scheme, and that lender must confirm it will not allow additional borrowing without the scheme's prior consent¹⁴. If you later remortgage with a different lender under the Help to Stay Wales scheme, a Deed of Postponement is required to confirm the scheme's charge remains in second place behind your new lender¹⁵.

Early repayment charges: often why a second charge is considered

An early repayment charge is a charge levied by the mortgage lender when the loan is repaid in full or in part before a date or event set out in the contract¹⁶. If you remortgage during the initial fixed or tracker period, you will likely need to pay one¹⁷.

The size varies. Early repayment charges are usually charged as a percentage of the overall loan, reducing over time. On a five-year fix, Which? gives the example of 5% of the mortgage balance in year one, 4% in year two and 3% in year three². Which? also reports that these fees can add up to tens of thousands of pounds², and that they can potentially reach 5% of the amount repaid in the first year of a deal¹⁸.

Lenders set their own scales. One building society's two-year discount remortgage product charges 2% of the amount repaid early plus fees during year 1, and 1% of the amount repaid early plus fees during year 2¹⁹. That is a single product example, not a market rate, but it shows the shape: the charge falls as the deal runs on.

There is a rule on how the charge is worked out. The FCA says a firm should not use the 'Rule of 78', which it describes as not appropriate because it effectively front-loads the charge²⁰.

If you are near the end of a deal, waiting can remove the charge entirely. If you are not, the early repayment charge is often the single biggest number in the comparison, and it is the reason a second charge mortgage gets considered at all.

Costs compared: interest rates, arrangement, valuation and legal fees

The two routes carry different cost structures, and the headline rate is only part of it.

On the remortgage side, the fees you will need to pay include application fees, valuation fees and solicitor's fees²¹. There are also early repayment charges, a deeds release fee, valuation fees, legal fees, lender application fees and broker fees, varying by circumstances, lender and product¹³. Leeds Building Society lists arrangement or product fees, valuation fees, broker fees and application fees²².

Fee levels have been rising. As of January 2026, the average fee on the top remortgage two-year fixes was £1,673, an increase of £475 compared with the same time a year earlier, and the most common fee for top deals was £1,999³. Remortgagers are typically charged higher fees for the top deals, with many close to £2,000²³.

There is a trade-off between fee and rate. For those remortgaging, the average difference between the lowest no-fee rate and the lowest overall rate was 0.17 percentage points over the three months to 30 January 2026³. A lower rate with a fee is not automatically cheaper than a slightly higher rate without one; the fee has to be earned back over the deal period.

Using either option to consolidate debts

Around two thirds of second charge mortgages are used for debt consolidation¹. The rationale is to secure a lower rate of interest so that the borrower has only one, lower monthly repayment to make²⁴.

The advantages commonly cited are paying a lower rate of interest, lower monthly payments, a known end date, a single monthly payment, dealing with only one lender, and avoiding a bad credit rating from missed payments²⁵. Longer-term consolidation loans may be better value than short-term borrowing²⁵.

The risks are just as real. The repayment term on a consolidation loan is typically longer than your existing credit commitments were scheduled to run for²⁴. Some consolidation loans may take you a longer time to pay back than your original debt, which can make them more expensive in the long term than your current debt²⁶. Interest and charges are added to your repayments²⁷, and there can be extra charges when paying off your loans and arranging others, adding to your total debt²⁸.

There is also a protection point. If you remortgage or take a second mortgage, you will need life insurance to match the new debt, and a policy should not be cancelled without having secured a replacement first²⁹.

Alternatives include making new arrangements with your existing lenders, making best use of existing credit options such as an overdraft, credit or store cards, a personal loan or mortgage extension, or borrowing from relatives²⁵. Debt consolidation can cost more, a poor credit score may mean higher interest, and it might not help clear debts³⁰.

When remortgaging may not be possible or suitable

Remortgaging may not be an option if you are tied into an existing deal, your financial position has worsened, or the value of your home has fallen¹³.

Being tied in is the most common blocker. If you are still in the introductory fixed term, you could face expensive early repayment charges when remortgaging to another lender³¹. If you remortgage during your fixed term, you will need to pay charges to your lender³².

There are also regulatory limits on what a lender can do. FCA responsible lending rules do not apply to a variation that reduces, including to zero, the capital repayments required under a repayment mortgage for a period of no longer than six months, and that exception does not cover a bridging loan or a second charge regulated mortgage contract, and does not apply if the mortgage has already been varied under that provision³³.

Some borrowers are steered by the rules themselves. The FCA requires firms to inform customers raising additional money through a remortgage of their first charge loan that a second charge mortgage or an unsecured loan may be possible or more appropriate, as well as a further advance¹. It also requires firms to inform second charge applicants that a further advance with their existing lender, a remortgage or an unsecured loan may be possible or more appropriate¹. In other words, the lender or broker is expected to put the alternatives in front of you rather than let you default to one route.

If your credit history is the problem, there are lenders who work in that market, and free guidance on remortgaging with bad credit is available³⁴. If you are already behind on payments, the priority is different: free help with mortgage arrears is available, and the earlier you take it the more options remain³⁵.

Applying and timing: how long each route takes

A remortgage involves a valuation, underwriting, a mortgage offer and legal work, because a solicitor or conveyancer is needed when you move to a new lender, borrow more, change ownership or have the home revalued³⁶. Some remortgages include a free legal package, but the lender then selects the solicitor for you¹³.

A second charge mortgage is a separate loan application with its own underwriting, secured against the same property. It does not disturb your existing first mortgage, which is the point: no early repayment charge is triggered on the first charge because the first charge is not being repaid.

The practical sequence for either route is:

1. Check your current mortgage terms, including any early repayment charge scale and the date your deal ends.
2. Check your credit file and the current value of your home.
3. Work out the total cost of each route, including fees, over the period you expect to hold it.
4. Get the alternatives in writing, including a further advance from your existing lender.
5. Allow time for valuation, underwriting and legal work before you need the money.

Timing matters most around the end of a fixed deal. If you remortgage during your fixed term, you will need to pay charges to your lender³², so the cheapest moment to remortgage is usually once the deal has ended. If you need the money sooner, that is exactly the gap a second charge mortgage fills.

What happens if you sell, fall behind or die

A second charge mortgage is repaid when the home is sold. On a sale, the first mortgage is cleared first, then any second charge, then other debts secured on the home: creditors with a second mortgage may be entitled to a share of the proceeds, but the debt to the mortgage lender is paid first³⁷. If selling your home does not raise enough to repay the first mortgage, and any other mortgages, plus all the costs, you may still owe some money to the lender³⁵.

If you buy another property while you still have an outstanding debt to a previous lender, that lender may be able to put a charge on your new home and claim part of the proceeds when it is sold³⁸.

On death, the position depends on insurance. If the mortgage lender required life insurance, this may pay off the full amount of the loan; if there is no insurance, or for second mortgages not covered, the property may have to be sold³⁹.

If you fall behind, the same warning applies as for any mortgage: your home may be repossessed if you do not keep up repayments on your mortgage¹⁰. Free help is available, including from MoneyHelper and debt advice charities, and there are specific routes for mortgage arrears³⁵.

Regulation: how second charge mortgages are treated

Second charge mortgages were brought into the regulated mortgage contract regime in March 2016, having previously been regulated as consumer credit⁵. That means they now sit under the same mortgage conduct rules as first mortgages, including responsible lending requirements.

There is one gap worth knowing about. It is unclear whether the Mortgage Charter applies to second charge mortgages⁴⁰.

There is also a specific rule on charges. A second charge lender may only charge interest on charges applied to a customer for breach of a second charge regulated mortgage contract if the interest is simple interest⁴¹.

On the data side, second charge mortgages have been excluded from other specialist lenders' secured lending data since January 2008, which is why the market is harder to size from published figures than the first charge market⁴².

If something goes wrong with either route, the Financial Ombudsman Service can look at complaints about mortgage lending⁵. Free, impartial guidance on mortgages and on debt is available from MoneyHelper and from debt advice charities, and it costs nothing to ask before you commit.