Posted by admin On December 23rd 2020
A legal call on a property after all the liabilities to the holder of the first charge has been met and settled.
These are created when the borrower gives the property as security for a second time while the first lender still has a mortgage secured on the property.
The new lender takes a second charge on the property whilst the original lender retains the deeds and its charge takes priority over subsequent charges. This means that, in the event of a sale due to default, the original lender’s claim will first be met in full (if possible) and, if sufficient surplus then remains, the second mortgagee’s charge will also then be met.
Lenders will, naturally, only offer a second mortgage if there is sufficient equity in the property and, since second mortgages represent a higher risk to lenders, they are likely to be offered at higher rates of interest than first mortgages as standard.