Second Mortgages on your property  –  what you need to be aware of

In these current uncertain times it is hardly surprising that many people are finding themselves in financial difficulties.

Often a person’s largest asset is the equity in a property that they own and it can be tempting to look to release some of that to alleviate financial hardship. Often people look to take out a second mortgage over their property to release some of that equity.  Before you do, however, there are some factors which you need to consider very carefully.

The first consideration that you have is in relation to your first mortgage. Sometimes, a lender will have a restriction on your deeds which means that their consent must be obtained before you can obtain secondary financing secured against your property. There is often a cost in obtaining this consent.

Secondly, interest rates on secondary lending can be substantially higher than it is under a first mortgage. We advise you to seek the advice of a financial adviser before agreeing to any secondary lending. It may be more cost effective, for example, to refinance the first mortgage with a new lender (this is known as remortgaging) or taking a further advance on your existing mortgage.

Thirdly, secondary lending can often be nothing more than a short term solution. Some lenders will only advance monies on a relatively short period of time, for example five years. This means that, although you will have a capital sum available immediately, the repayments will be high due to the short term nature of the financing.


If you have any question in relation to remortgaging or need the assistance of a financial adviser why not contact one of Alexander JLO’s expert property lawyers who will be happy to assist or refer you to one of our panel of financial advisers?

 

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