Remortgage or Second Charge? Let’s Compare…
When you need to raise additional funds against your property, two popular options are remortgaging and taking out a second charge mortgage (also known as a secured loan). Both can help you release equity for purposes such as home improvements, debt consolidation, or funding large purchases — but the right choice will depend on your individual circumstances.
At Celtic Finance, we help clients weigh up both routes to find the most cost-effective, suitable solution. Let’s break down the benefits of each and when they may be the better fit.
What is a Remortgage?
A remortgage involves switching your current mortgage to a new deal, either with your existing lender or a new one. This replaces your current mortgage entirely, often to secure a better rate or release additional equity.
Benefits of a Remortgage:
Potentially lower interest rates – If market rates are lower than your current deal, a remortgage could reduce your monthly payments.
Simplified repayments – You’ll have just one mortgage account to manage and one monthly payment.
Option to borrow more – You can increase the mortgage amount to release cash for projects or expenses, however lending is more limited compared to a second charge.
Switch product type – For example, moving from a tracker rate to a fixed rate for more certainty.
When a Remortgage Works Best:
Your current mortgage deal is ending soon (to avoid early repayment charges).
Market interest rates are favourable.
You have improved your credit profile since your last mortgage.
You want to consolidate borrowing into one monthly payment.
What is a Second Charge Mortgage?
A second charge mortgage is a separate loan secured against your property, in addition to your existing mortgage. You keep your current mortgage in place and take out a second agreement, often with a different lender.
Benefits of a Second Charge Mortgage:
Keep your existing mortgage rate – Ideal if you have a competitive rate you don’t want to lose, but still need to raise funds.
Avoid early repayment charges – No need to pay penalties for ending your current deal early.
Flexible borrowing – Can be available to those with much more complex income sources, credit histories or security types.
No solicitors or legals – Most second charge lenders do all their legals internally, meaning no solicitor fees and also much quicker completion times.
Borrow more - Most second charge lenders lend up to x6 your combined annual income, and some can go above this if the loan is still deemed affordable.
When a Second Charge Works Best:
You’re tied into a low-rate fixed mortgage with high early repayment penalties.
You only need to borrow a smaller additional amount.
You have a unique income situation that might not fit traditional remortgage criteria.
Your credit circumstances have changed since you took your main mortgage.
You can’t borrow enough on a remortgage (generally, lenders work off a maximum borrowing amount of: 4.5x income on most remortgages vs 6x income for a second charge.
Which Should You Choose?
There’s no one-size-fits-all answer. The right option depends on factors like:
Your current mortgage deal and whether you’d face penalties.
Your credit profile and income situation.
How much you need to borrow and for what purpose.
The interest rate environment.
Expert Advice from Celtic Finance
At Celtic Finance, we assess your full financial picture to determine whether a remortgage or a second charge mortgage will deliver the best value. We compare products from a wide range of lenders, ensuring you get clear, tailored advice — not a one-size-fits-all recommendation.
Get in touch today to explore your options and secure the most cost-effective way to release equity from your home.
