Second charge mortgage explained: how to release equity in your property for business growth

A second charge mortgage (sometimes called a second charge loan) sits alongside your existing mortgage and uses the difference between your property’s current value and what you still owe on your first mortgage as security. Because the first lender keeps priority if you default, second charge lenders usually charge a little more to make up for their lower claim - but this setup means you keep your original mortgage deal and avoid any early repayment fees on your first loan.

How big is the market?

In the UK, more businesses are choosing second charge mortgages to access cash. The Finance & Leasing Association reported a 17% rise in new second charge mortgages in 2024, with nearly 36,000 loans agreed . Between January and August 2024, volumes were 14% higher than in the same period of 2023 . While plans for older homeowners often run into six figures (£111,618 on average in Q3 2024) , business owners typically start from £50,000 and can borrow much more depending on their equity.

How does it compare with other options?

Cost: Second charge rates are higher than first-charge remortgages (typically 3–6%), but lower than many unsecured loans if you need larger sums Money Saving Guru thesecondmortgagecompany.co.uk.

Speed: Compared with full remortgaging, second charge loans can complete in 2–4 weeks, making them faster for sizable borrowing needs.

The good and the not-so-good

The good

• Keep your current deal: no early repayment fees on your first mortgage.

• Bigger amounts: borrow from £50,000 up to most of your equity.

• Flexible terms: choose 5-30 years to match your budget.

The not-so-good

• Repossession risk: miss payments and you could lose your property.

• Higher rates: second charge loans cost more than first mortgages.

• Additional fees: valuation, legal and arrangement fees can add 1%-3% of the loan.

What to expect in the application

At Funding Options by Tide, we can help you getting a valuation to see how much equity you have. Then you compare quotes - often from over 120 lenders - in minutes . You’ll need ID, your business accounts (usually at least 12 months trading), and details of outstanding debts. The lender arranges a property survey to confirm value and condition. If you get an offer, a solicitor registers the second charge. From offer to funds takes about two to four weeks, depending on survey times and legal work.

Most lenders lend up to 75%-85% of your available equity and set a minimum of about £50,000. Some specialist lenders will consider newer businesses, especially if directors can offer extra security.

Some fictitious examples

• A Manchester café needed £100,000 to open a second location but had used all its unsecured borrowing. By taking a second charge mortgage at 7.5% APR over 15 years, they launched two months later and added £250,000 in annual sales, easily covering both loans.

• A small manufacturer borrowed £250,000 against its factory at 8.2% APR over ten years to buy new machinery. Production went up by 30%, and they saw a full return on investment in under 18 months without giving up any ownership.

Things to keep in mind

Plan for covering both mortgage payments, even if business slows. Keep an eye on property values so your loan stays sustainable. It helps to have a cash buffer equal to at least three months of payments. Watch Bank of England rate decisions - two-year fixed mortgage rates averaged 4.6% in May 2025 - and think about refinancing if rates drop. Finally, work with a broker who knows second charge deals and a solicitor experienced with legal charges.

Funding Options by Tide helps you to release equity in your property for business growth

For your growing business, borrowing from a trusted lender can help you optimise your finances. 

At Funding Options by Tide, we help you connect with 120+ lenders across the UK. 

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Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business and personal credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.