There is still a significant cohort of homeowners, 43%, who are completely unaware that they could release equity in their homes by taking a second charge mortgage to fund renovation costs or assist with debt, according to new research from Together.
The number of customers opting for second charge mortgages to fund renovation costs jumped by 10% between 2018 and 2022, research shows.
Together’s research also found a further 19% of homeowners are open to second charge mortgages this year to help with existing debt and loan consolidation.
James Briggs, head of personal finance intermediary sales at Together, said: “A second charge mortgage can offer a cost-effective route for homeowners needing to raise money for home improvement plans, when compared to remortgaging.
“This gives homeowners the option to release the equity in their property that they need for improvements, while keeping what may be a favourable, existing mortgage rate.
“However, as second-charge mortgages are not widely available through high street lenders. It’s critical that people discuss their circumstances with a professional mortgage broker to understand how they can work as a viable option – be it for renovation plans or to help with debt consolidation this year.”
Second charge mortgages run alongside current mortgages and allow borrowers to use their property as security against a loan.
By using equity built up in the property, this can be leveraged to borrow money without remortgaging and interest rates tend to be lower than what you would be charged on unsecured loans.
These mortgages also mean borrowers avoid penalties such as Early Repayment Charges (ERCs) which may apply if remortgaging out of an existing fixed rate arrangement early.
