Why homeowners choose a second-charge loan over a remortgage

The case for a second charge right now

Second charge lending is having a moment in the UK. According to recent industry data, new second charge mortgage lending rose by around 18% in Q1 2025 against the same period last year, with over £1.4 billion advanced in the past 12 months and forecasts pointing to £1.7 billion by year end. That growth tells a clear story. Homeowners want flexible finance that does not disturb their hard-won main mortgage deals. If you locked into a competitive rate during 2021 to 2022, remortgaging today could mean higher interest and potential early repayment charges. A second charge can access equity without touching your first mortgage, allowing you to ring-fence that low fixed rate.

The reasons people borrow are shifting too. With higher base rates cooling the appetite to move home, borrowers are upgrading where they live instead. One in ten homeowners plan to use a second charge for home improvements, with a notable share focused on energy efficiency. Debt consolidation is another dominant theme, representing more than four in five second charge cases. The appeal is straightforward. Simplify outgoings, potentially reduce monthly payments, and bring multiple balances under one secured facility.

Speed and flexibility matter. Second charge approvals can be quicker than remortgaging, with specialist lenders designed for urgency. That agility is valuable when you have a contractor’s quote that will not wait, a tax bill deadline, or a time-sensitive opportunity such as a buy-to-let deposit. Even with recent regulatory changes increasing reporting and compliance costs for lenders, the market continues to expand, outpacing segments like buy-to-let by a wide margin in 2025.

At Kandoo, a UK-based retail finance broker, we help you compare second charge options side by side with remortgaging and unsecured borrowing. Understanding APR is not just about percentages - it is about what you will pay in real terms. The right route depends on your equity, credit profile, income stability, and the costs of exiting your current mortgage. We break down the moving parts so you can decide with confidence.

A second charge keeps your primary mortgage intact while leveraging your equity for targeted borrowing.

When used responsibly, a second charge is a precise tool. It can be cheaper than remortgaging if you are protecting a low first-charge rate or avoiding substantial early repayment charges. It can also be riskier if repayments stretch your budget or if property values fall. The crucial step is to run the numbers carefully, compare total costs over the term, and consider your near-term plans. If you might move or fully repay soon, a product with lighter exit fees and shorter terms may suit. If you want predictable payments, a fixed rate could be worth prioritising.

Who benefits most

Second charge borrowing suits homeowners with equity who want to retain a favourable first-charge rate while accessing funds quickly. If your current mortgage is mid-fix, the cost of remortgaging can be disproportionate relative to the additional borrowing you need. In that case, a second charge isolates the new borrowing and preserves the original deal.

It is also well suited to those consolidating multiple debts into one structured plan. The same applies to homeowners funding renovations that enhance value or cut energy bills. Investors looking to move quickly on a buy-to-let deposit can find the speed of second charge lending compelling compared to the pace of full remortgage underwriting.

Second charges are not a one-size solution. If you have limited equity, unstable income, or anticipate moving soon, a remortgage or unsecured loan may be safer. The smartest path is to compare options on total cost, flexibility, and how long you expect to hold the borrowing.

Jargon, decoded

• Second charge mortgage - A secured loan on your property that sits behind your existing first mortgage.

• Loan to value (LTV) - The loan size compared against your property value, expressed as a percentage.

• Equity - Your property value minus the amount you owe on existing mortgages.

• APRC - Annual Percentage Rate of Charge reflecting the total yearly cost of credit including fees.

• Early repayment charge (ERC) - A fee for exiting a mortgage deal before the term ends.

• Capital and interest - Repaying the borrowed amount plus interest across the term.

• Fixed vs variable rate - Fixed provides payment certainty, variable can move with market rates.

• Debt consolidation - Combining multiple debts into one loan, potentially reducing monthly outgoings.

Ways to structure your borrowing

1. Second charge for home improvements - Preserve a low first-charge rate while funding kitchens, extensions, or energy upgrades. Useful when contractor timelines demand speed and your ERCs are high.

2. Second charge for debt consolidation - Replace multiple unsecured balances with one secured plan. Prioritise total cost, not just lower monthly payments, and check any fees on closing old accounts.

3. Second charge for buy-to-let deposit - Leverage equity to secure an investment property without remortgaging your home. Assess rental yield, stress tests, and tax implications before proceeding.

4. Remortgage with additional borrowing - Suitable if your current deal is ending or ERCs are minimal. One application, one rate, potentially simpler administration.

5. Unsecured personal loan - No charge on your home, usually faster and smaller amounts, but often higher rates and shorter terms.

6. Further advance from your existing lender - Additional borrowing tied to your current mortgage. May be convenient, but rates and criteria vary by lender.

What it could cost and why it matters

Can you qualify

Lenders will assess your equity, affordability, and credit history. You will usually need a first mortgage in place and sufficient equity so that the combined balances sit within the lender’s maximum LTV. Underwriters test your income and outgoings to ensure repayments fit within disposable income after stress testing. Credit issues do not automatically exclude you, though they can affect rates and available products. A recent valuation may be required to confirm property value. If you have significant ERCs or a valuable fixed rate on your first mortgage, a second charge can be a pragmatic route to access capital without triggering those costs. Where timing is tight or funds are needed for a tax bill, renovations, or a deposit, the faster processing of second charges can be decisive.

From application to funds in simple steps

1. Check equity, credit file, and your current mortgage terms.

2. Define amount, purpose, and ideal repayment timeframe.

3. Get indicative quotes from a whole-of-market broker.

4. Compare APRC, fees, and total cost over term.

5. Submit documents - ID, income proofs, statements, bills.

6. Property valuation arranged and underwriting completed.

7. Review offer, sign, and receive funds to your account.

The trade-offs at a glance

Read this before you sign

Take time to model the total cost, not just the monthly payment. If consolidating debts, avoid running up new balances that erase the benefit. Consider how long you will hold the loan and whether early repayment is likely, then choose a product with fair exit terms. Factor in potential house price movements and future rate changes. Make sure you can evidence stable income that comfortably supports repayments. If your current deal is ending soon and ERCs are modest, a remortgage could still be cheaper overall. Independent advice from a broker like Kandoo can help you stress test scenarios and benchmark offers across multiple lenders.

Alternatives worth considering

1. Remortgage at deal end - Fold new borrowing into a single mortgage when ERCs are minimal.

2. Further advance - Borrow more from your current lender for convenience and unified servicing.

3. Unsecured personal loan - Smaller sums, no property charge, usually higher APRs.

4. 0% transfer or low-rate credit card - Short-term tactical borrowing if you can repay quickly.

5. Government or local authority schemes - Energy efficiency grants or loans for eligible improvements.

Frequently asked questions

Q: How fast can I get a second charge loan? A: Timescales vary by lender, but second charges are often faster than remortgages. With documents ready and a straightforward valuation, funds can arrive in days rather than weeks.

Q: Will it affect my current mortgage deal? A: No. A second charge sits behind your first mortgage, so your existing rate and terms remain unchanged. Your combined borrowing will be considered for affordability and LTV.

Q: Is debt consolidation always cheaper? A: Not always. Monthly payments may fall due to longer terms, but total interest can rise. Compare APRC, fees, and settlement costs on existing debts before deciding.

Q: Can I get a second charge with past credit issues? A: Possibly. Specialist lenders consider imperfect credit, though pricing may be higher. Strong equity and stable income can help.

Q: What can I use the funds for? A: Common uses include home improvements, debt consolidation, tax bills, and buy-to-let deposits. Check lender policies and ensure the purpose fits your budget and objectives.

Q: How does regulation affect borrowers? A: Recent rule changes increased lender costs and reporting, but products remain widely available. Terms may evolve, making broker comparisons important.

Make your move with confidence

If you want capital without disturbing a prized first-charge rate, a second charge is worth a close look. Kandoo can benchmark whole-of-market options, calculate total costs, and help you choose a structure that suits your plans and risk tolerance. A short consultation can save time, money, and uncertainty.

Important information

This guide is for information only and does not constitute advice. Secured lending puts your home at risk if you do not keep up repayments. Eligibility, rates, and terms depend on individual circumstances and may change.