If you need to raise money against your home, the two most common routes are remortgaging and taking out a second charge mortgage. Both involve borrowing against your property. But they work differently, and choosing the wrong one can cost you significantly more over the term.
This guide explains how both work, when each one makes sense, and the questions worth asking before you decide.
The basic difference
A remortgage replaces your existing mortgage with a new one. You repay the current lender in full and take out a new, larger mortgage — either with the same lender (a product transfer with additional borrowing) or with a new one. Everything is consolidated into a single loan.
A second charge mortgage sits alongside your existing mortgage without disturbing it. You borrow the additional amount separately, secured against the equity in your property. Your first mortgage stays exactly as it is — same lender, same rate, same terms.
| Feature | Remortgage | Second Charge |
|---|---|---|
| Existing mortgage | Replaced with a new one | Left completely in place |
| Early repayment charges | May apply on existing mortgage | No — first mortgage untouched |
| Rate on existing balance | Changes to new rate | Unchanged |
| Number of monthly payments | One | Two (first + second) |
| Speed | 4–8 weeks typically | 2–4 weeks typically |
| FCA regulated (residential) | Yes | Yes |
When a second charge is the better option
You have a low rate worth keeping
If you fixed your mortgage when rates were historically low — 1.5%, 2%, 2.5% — remortgaging today means applying current rates to your entire outstanding balance. Depending on the size of that balance, the extra interest cost can dwarf any benefit from consolidating into one loan.
A second charge lets you borrow the additional amount at today’s rate while the existing mortgage ticks along at the old one. The blended rate across both loans may be considerably lower than a full remortgage.
Existing mortgage: £300,000 at 1.89% fixed — 3 years remaining on fix
Amount needed: £50,000
Remortgage route: £350,000 at today’s rate (say 4.5%) — monthly payment approx £1,944
Second charge route: Keep £300,000 at 1.89% (approx £1,255/mo) + £50,000 second charge at 6.5% (approx £380/mo) — total approx £1,635/mo
In this example the second charge route saves around £300/month despite the higher rate on the second charge, because the bulk of the borrowing stays on the original low rate.
Early repayment charges make remortgaging expensive
Most fixed rate mortgages carry early repayment charges during the fixed period — typically 1–5% of the outstanding balance. On a £300,000 mortgage with a 2% ERC, that’s £6,000 to exit early. A second charge avoids the first mortgage entirely, so no ERC is triggered. The charge simply doesn’t apply.
Once the fixed period ends and the ERC falls away, you can reassess — either keeping both loans or consolidating into a single remortgage at that point.
You have an interest-only mortgage you want to retain
If you’re on an interest-only mortgage that you couldn’t replicate today — either because criteria have tightened or because your circumstances have changed — remortgaging risks losing that position. A second charge lets you raise additional funds without having to justify the interest-only arrangement on a new application.
You need a relatively small amount
If you need £20,000–£50,000 for home improvements or another purpose, the legal and administrative cost of a full remortgage may not be proportionate. A second charge can be faster and more cost-efficient in these cases.
When remortgaging is the better option
Your current deal is ending anyway
If your fixed rate is expiring in the next few months and you’d be remortgaging regardless, it usually makes sense to increase the borrowing at the same time. No ERCs apply at the end of a fixed period, and having one consolidated loan is simpler to manage than two.
You have no early repayment charges
If you’re already on your lender’s standard variable rate, or on a tracker with no ERCs, remortgaging has no penalty. In that case the rate comparison becomes the primary factor — and in many situations a remortgage at a competitive fixed rate will be cheaper than a second charge.
The rate difference favours remortgaging
Second charge rates are typically higher than equivalent first charge rates. If your existing mortgage rate is already close to current market rates, the argument for keeping it in place weakens. Run the numbers both ways before deciding.
Can you do both — second charge now, remortgage later?
Yes, and this is a common approach. Take a second charge during the fixed period to avoid the ERC. When the fixed rate expires, consolidate both loans into a single remortgage at the best available rate at that point. It gives you access to funds now without paying the penalty, while leaving your options open.
The right answer depends on your specific numbers — the size of your existing mortgage, the rate you’re on, how long is left on your fix, how much you need to borrow, and what you’re borrowing for. We run both scenarios side by side before making any recommendation.
What about a further advance from your existing lender?
A further advance is a third option that often gets overlooked. Rather than a separate second charge lender, you go back to your existing mortgage lender and ask to borrow more on top of your current mortgage. It’s straightforward, involves only one lender, and can sometimes be arranged without a full new application.
The downside is that you’re limited to what your current lender will offer — their rates, their criteria, their appetite. You can’t shop around. And if your lender’s rates aren’t competitive, you may be paying more than you need to. But for the right situation — particularly if your lender has a good rate and you’re well within their criteria — it’s worth checking first.
You can arrange a further advance directly with your lender without going through a broker. We’ll always go through all the options with you — including a further advance, which you can arrange directly and doesn’t involve us at all. If that’s the right answer for your situation, we’ll tell you.
What about unsecured borrowing?
For smaller amounts, it’s worth considering whether a personal loan is more appropriate than secured borrowing. Personal loans don’t put your home at risk, are faster to arrange, and for amounts under £25,000–£30,000 the rate difference may not be as significant as you’d expect. The downside is a shorter term and higher monthly payments. It’s worth including in the comparison.
Not sure which route is right for you? We’ll run the numbers on both and give you a straight answer. Call us on 01277 564 054 or send a message.
Talk to an AdviserFAQs
A remortgage replaces your existing mortgage with a new one. A second charge mortgage sits alongside your existing mortgage and leaves it in place. You borrow the additional amount separately, secured against the equity in your property.
A second charge is often better when your existing mortgage has early repayment charges, a low fixed rate worth keeping, or when remortgaging the full balance at current rates would cost more overall than keeping the first mortgage and taking a second charge for just the additional amount.
Remortgaging makes more sense when your current deal is ending anyway, when you have no early repayment charges, or when the blended cost of keeping the first mortgage plus adding a second charge is higher than a single remortgage.
Yes. A common approach is to take a second charge during a fixed period to avoid ERCs, then consolidate both loans into a single remortgage when the fixed period ends.
Your existing mortgage terms are unchanged. The first charge lender is notified as standard procedure but cannot usually prevent it. Your rate and payments on the first mortgage stay the same.