Remortgage or second charge: which suits you?

If you want to borrow more against your home, for example for an extension, there are two common routes. You can remortgage, or you can keep your current mortgage and add a second charge. Each has costs and risks, and the right choice depends on the figures.

What a remortgage is

A remortgage replaces your existing mortgage with a new one. You can borrow more at the same time, and you end up with one mortgage and one monthly payment. If you leave your current deal early, you may have to pay an early repayment charge, and the new mortgage may have fees.

What a second charge is

A second charge is a separate loan secured on your home, behind your existing mortgage. Your first mortgage stays in place, so you keep its rate and terms. The second loan has its own rate, term and costs, and it is often more expensive than a first mortgage, although the total may still be lower than the cost of leaving a good deal early.

How to compare them

• Your current rate. If it is low and you want to keep it, a second charge may be worth a look.
• Early repayment charges. If leaving your deal early is costly, a second charge may avoid that cost.
• The amount you need and the time you need it for. Smaller sums over shorter periods can work out differently from large sums over long ones.
• Total cost. Compare what you will pay over the whole life of each option, including fees, and not only the monthly payment.

Be careful about using your home to repay other debts

Combining debts into your mortgage or a second charge can reduce your monthly payments, but it may increase the total you repay, because you pay interest for longer. It also means debts that were unsecured become secured on your home, which could be repossessed if you do not keep up the payments. Think carefully, and ask for alternatives to be explained before you decide.

Planning building work

If you plan an extension or a loft conversion, check whether you need planning permission or building regulation approval before you borrow, because that affects cost and timing. Borrow only what you can afford to repay for the whole term.

Find out more

Read more about remortgages and second charges, or look at our areas we cover page to see how it applies where you live.

Talk it through

If you would like us to compare the options for you, get in touch.