The Client
The clients were a married couple who owned their residential home. The husband was self-employed and the wife worked part time while raising their children. Keeping up with the cost of running the home alongside their existing credit commitments had become increasingly stressful.
The Scenario
Over time the couple had built up more than £60,000 in unsecured credit, alongside a large outstanding HMRC tax bill. Their disposable income had moved into negative territory, and a standard remortgage was not a realistic option – their existing lender’s early repayment charge would have made switching expensive at exactly the point they could least afford it. They needed a way to consolidate the debt and clear the tax bill without giving up the rate they were already on.
The Solution
We recommended a second charge mortgage, sitting behind their existing first mortgage rather than replacing it. This protected their existing rate in full and meant the early repayment charge never came into play.
We raised £100,000 for the client through a second charge lender willing to consolidate the unsecured credit and settle the HMRC bill in full. As part of the application, the client confirmed what provisions they had put in place to prevent a similar tax liability building up again – a standard requirement on this type of consolidation case.
The Outcome
The second charge reduced the couple’s combined monthly outgoings from £1,400 to £500 – a saving of £900 a month, or £10,800 a year. Their disposable income moved from negative back into a comfortable position, and with the unsecured credit cleared they were left managing just two payments – their original mortgage and the new second charge – instead of juggling multiple separate creditors.
Settling the unsecured credit in full also puts them in a stronger position when they come to remortgage once their current fixed rate ends, since lenders will see a cleaner credit picture than they would have otherwise.
Frequently Asked Questions
What is a second charge mortgage?
A second charge mortgage is a separate loan secured against your property that sits behind your existing mortgage, rather than replacing it.
Your first mortgage continues on its original rate and terms, and the second charge lender is repaid after the first lender if the property is ever sold.
Why choose a second charge mortgage instead of remortgaging?
A second charge protects your existing mortgage rate, which matters most when remortgaging would trigger an early repayment charge.
It also avoids disturbing a deal you may not be able to replace on similarly competitive terms.
Can a second charge mortgage be used to pay an HMRC tax bill?
Yes, lenders will commonly allow funds raised through a second charge to be used to settle a tax bill.
They will usually want reassurance that steps have been taken to prevent a similar liability building up again in future.
Will a second charge mortgage affect my existing mortgage?
No, your existing mortgage and its rate remain completely unchanged.
The second charge is an entirely separate facility, and your first lender is not affected by the new borrowing.
If you have any questions relating to a second charge mortgage, contact us today to speak directly with one of our Mortgage Advisors.
UK Mortgage Broker is a whole-of-market broker directly authorised and regulated by the Financial Conduct Authority. Your home may be repossessed if you do not keep up repayments on your mortgage.
Call: +44 1628 969 500
Email: info@uk-mortgagebroker.co.uk
Related Pages
- Self-Employed Mortgage – how lenders assess self-employed income for mortgage and second charge applications
- Bad Credit Mortgages UK – specialist advice when credit issues complicate a remortgage or second charge case
- How Lenders Actually Check Your Income – what counts and what does not when a lender assesses affordability
- Remortgage UK – when remortgaging makes more sense than a second charge, and how the process works