How private second mortgages work, and when one makes sense

A private second mortgage lets you borrow against the equity in your home without touching the mortgage you already have. Your bank keeps first position at its rate, and a private lender registers a second charge behind it.

How much can you borrow?

Second-mortgage lenders size the loan on combined loan-to-value (CLTV): your existing mortgage plus the new loan, divided by the appraised value. Most private lenders cap CLTV between 75% and 90%, depending on location and property type.

Fees are often deducted from the advance, so the cash you receive will be a little less than the loan amount.

What payments look like

Most private seconds are interest-only on a 6 to 12 month term. On a $100,000 second at 11.99%, the monthly payment is about $999. You repay the principal at the end of the term, either by refinancing, selling, or renewing with the lender.

When a second mortgage makes sense

• Your first mortgage has a low rate or a large prepayment penalty you don't want to trigger.
• You need funds quickly for debt consolidation, tax arrears, a renovation or a down payment on another property.
• Your income or credit doesn't fit bank guidelines right now, but you have a clear plan to fix that within a year.

What it costs

Second-mortgage rates run higher than first-mortgage rates because the lender is paid only after the first mortgage in a sale. Expect a lender fee, a broker fee, an appraisal and legal costs. Compare offers on APR, not the headline rate. Our guide to the true cost of a private mortgage walks through the math.

Compare current second-mortgage rates

See today's private second mortgage rates, or send your details and we'll match you with the lenders that fit your property.