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Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home. Borrowing over a longer term can mean paying back more in total.
Having an existing secured loan, sometimes called a second charge mortgage, on your home doesn’t stop you remortgaging, but it does add an extra layer to the process. Both the loan and your main mortgage are secured against the same property, so a new lender needs to understand the full picture before agreeing to lend.
If your main deal is ending, or you specifically want to deal with the secured loan itself, it helps to know how lenders treat this situation and what your realistic options are.
What is a secured loan, and how does it sit alongside your mortgage?
A secured loan (second charge mortgage) is a separate loan, from a different lender, secured behind your main mortgage against the same property. If the property were ever sold, the main mortgage is repaid first, then the secured loan, from the sale proceeds. Our guide on what a second charge mortgage is explains how these usually work and why people take them out, often to avoid disturbing a competitive main mortgage rate.
Can you remortgage while a secured loan is still running?
Generally, yes. When you remortgage to a new main mortgage lender, that lender needs to know about the secured loan, because it affects your total borrowing and your loan to value across both. The secured loan lender may also need to consent to the new arrangement, since its loan ranks behind whatever the main mortgage becomes.
| Consideration | Why it matters |
|---|---|
| Total secured borrowing | Both the main mortgage and the secured loan count towards affordability and LTV |
| Consent from the second charge lender | Usually needed, since it ranks behind the main mortgage |
| Loan to value across both | Higher combined borrowing narrows the pool of willing lenders |
| Existing loan’s terms | Some secured loans carry early repayment charges if paid off early |
Should you pay off the secured loan as part of remortgaging?
You have broadly two options, and the right one depends on your figures:
- Consolidate it into the new mortgage. You borrow enough through the remortgage to pay off the secured loan at completion, leaving one loan instead of two. This can simplify your finances, but the loan becomes part of your mortgage over a potentially longer term, which can mean paying more overall even if monthly payments feel lower.
- Leave it running separately. You remortgage your main mortgage as normal and keep the secured loan in place behind it. This avoids disturbing the loan’s own terms, but means dealing with two separate payments and two sets of lender criteria going forward.
Our guide on remortgage or second charge mortgage compares the two products directly, which can help if you’re deciding whether to take on a new secured loan rather than what to do with an existing one.
Does a secured loan affect how much you can remortgage for?
It can. Lenders generally look at your total secured borrowing, not just the main mortgage, when assessing loan to value and affordability. If your secured loan balance is significant, it may reduce how much a new main mortgage lender is willing to offer, or affect which lenders are prepared to consider your case at all. Our guide on how much you can remortgage for covers how lenders generally approach these calculations.
What if you’ve missed payments on your secured loan?
Missed payments on a secured loan are reported to credit reference agencies in the same way as missed payments on any other credit, and can appear as missed payments or, in more serious cases, contribute to a default or CCJ if the debt escalates. If this has happened, be upfront with your adviser, since it will show on your credit file regardless, and being able to explain the circumstances tends to help.
What does this mean if you’re remortgaging with bad credit?
If you already have adverse credit, such as a CCJ, defaults or a debt management plan, alongside an existing secured loan, lenders are likely to look closely at your overall borrowing and your ability to manage it. This doesn’t rule out remortgaging, but it’s likely to narrow the field to lenders who are comfortable with both the credit history and the existing secured debt, which is where a specialist adviser can help. Read our guide on debt consolidation remortgages if you’re weighing up folding the secured loan into a new mortgage.
Whatever route you take, remember that a secured loan puts your home at risk if payments aren’t kept up, in the same way your main mortgage does, so weigh consolidating carefully rather than assuming it’s automatically the simpler choice. Free, impartial guidance on managing multiple secured and unsecured debts is available from MoneyHelper and StepChange.
What if your secured loan has an early repayment charge?
Many secured loans carry their own early repayment charge for paying off the balance ahead of schedule, separate from any charge on your main mortgage. If you’re planning to consolidate the loan into a new remortgage, it’s worth getting a settlement figure from the secured loan lender early, so the true cost of consolidating, including any charge, can be weighed against keeping the loan running as it is.
How do lenders decide whether to allow the arrangement?
A new main mortgage lender will typically want to understand the size and terms of the secured loan, how it’s been conducted (including whether payments have always been on time), and how the combined borrowing fits within its own loan to value limits. The second charge lender, in turn, will usually need to formally consent to the new main mortgage arrangement, since its position behind the main loan doesn’t change but the identity of the main lender does. This coordination is normally handled between solicitors and both lenders, so it’s rarely something you need to manage directly, though it can add a little time to the overall process.
Frequently asked questions
Can you remortgage if you have a second charge loan?
Yes, in most cases, though your new lender and the second charge lender both need to be satisfied with the arrangement, and your total secured borrowing across both is assessed for affordability, not just the main mortgage on its own. Practice varies between lenders.
Does remortgaging automatically pay off a secured loan?
Not automatically. Some people choose to consolidate the secured loan into the new mortgage, so it's paid off as part of completion, while others keep it running separately behind the new mortgage. Both are possible depending on the lender and figures involved.
Will a secured loan show up as adverse credit?
The loan itself isn't adverse credit, but any missed payments on it will show on your credit file in the same way as missed payments on any other credit account. Check your statutory credit report if you're unsure exactly how it's being reported by your lender.
Is it better to pay off a secured loan or remortgage around it?
It depends on the cost of paying it off (including any early repayment charge on the loan) versus the cost of keeping it running behind a new mortgage. Comparing both, with an adviser who can see the whole picture, usually gives a clearer answer than guessing.