TL;DR: A secured loan lets you borrow money using the equity in your home as security. It sits separately from your existing mortgage as a second charge, registered at the Land Registry.
Your current mortgage stays completely unchanged. You make two separate monthly payments to two different lenders. Lenders will generally advance up to 80–85% of your property’s total value across both loans. The process usually takes four to six weeks from application to receiving your money.
You need a significant sum of money.
Perhaps £50,000 for a new kitchen and extension, or £80,000 to consolidate a handful of expensive debts. A personal loan at the rates on offer would mean monthly repayments that are hard to stomach, and your existing mortgage has a good rate you’d rather not disturb.
That’s exactly where a secured loan comes in. It lets you access the equity tied up in your home without touching your current mortgage deal. The lender takes a legal charge over your property as security, which is what makes the rate considerably lower than an unsecured loan.
Reading this, you’ll understand the full process: how the lending is calculated, what happens with your existing mortgage lender, the costs involved, and how to decide whether this is the right route for your situation.
What Is a Secured Loan?
A secured loan is money you borrow using your home as security. If you stop making payments, the lender has the legal right to apply for possession of the property to recover what they’re owed.
In the UK, these loans go by several names: homeowner loans, second charge mortgages, or second charges.
They all refer to the same type of borrowing.
The loan sits behind your existing mortgage in what’s called a “second charge” position, meaning your mortgage lender gets paid first if the property is ever sold due to mortgage arrears.
Secured loans are regulated by the Financial Conduct Authority (FCA) in the same way as mortgages. That means lenders must assess your affordability, carry out proper due diligence, and follow strict conduct rules before approving you.
How a Secured Loan Actually Works
The process has several distinct stages.
Understanding each one makes the whole thing far less opaque.
Stage 1: Working Out What You Can Borrow
Your property’s value and your outstanding mortgage balance are the starting point.
Say you own a property worth £600,000 with £200,000 left on your mortgage. Your equity stands at £400,000.
Secured loan lenders will generally advance up to 80–85% of your property’s total value across all secured borrowing, which means total borrowing of £480,000–£510,000.
Since you already have £200,000 on your mortgage, you could potentially borrow a further £280,000–£310,000 through a secured loan, subject to income and affordability.
The lender then assesses your income and outgoings to check you can comfortably manage the additional monthly payment on top of your existing commitments.
Your credit history plays a part too, though the property security means lenders are often more flexible here than they would be for an unsecured loan.
Stage 2: The Security and Charges
Your mortgage lender holds what’s called the “first charge” on your property. Registered at the Land Registry, this gives them priority if the property is ever sold.
A secured loan creates a “second charge,” which is also registered at the Land Registry.
The second charge lender has a legal claim on your property, but they sit behind your mortgage lender in the queue. Your existing mortgage remains completely separate and unchanged throughout: same lender, same rate, same monthly payment.
Getting Your Existing Lender’s Consent
Before the second charge can be registered, your mortgage lender must give their consent.
The secured loan lender writes to them formally requesting permission to place a second charge on the property.
This step catches some people off guard.
Most mortgage lenders will agree, but it’s not guaranteed. If your mortgage lender refuses consent, the secured loan cannot go ahead. A good broker will flag this early in the process and advise on your options.
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The Application Process
Documents You’ll Need
The application process is similar to a mortgage application but generally less involved. You’ll need proof of identity, proof of income (recent payslips or, if self-employed, the last two years’ accounts or tax calculations), recent bank statements, details of your existing mortgage, and information about any other debts.
Self-employed applicants often find secured loan lenders more accommodating than personal loan providers. The property security reduces the lender’s risk, giving them more flexibility when assessing non-standard income structures.
Read more: What documents do I need for a secured loan?
Property Valuation
The lender arranges a valuation of your property to confirm its current market value and check for any issues that might affect its saleability.
That figure determines how much you can borrow. If the valuation comes back lower than expected, your maximum loan amount drops accordingly.
Some lenders use desktop valuations for straightforward cases; others will send a surveyor to inspect the property. The cost is sometimes covered by the lender, but not always.
Legal Work
You’ll need a solicitor or licensed conveyancer to represent your interests and handle the registration of the second charge at the Land Registry. The lender will have their own legal team working in parallel. Some lenders cover the legal costs on your behalf; others pass these on to you.
Legal work runs alongside the lender’s underwriting. Once both are complete and all conditions are satisfied, the loan completes and the money is paid out.
What Does a Secured Loan Cost?
Monthly Payments
Once the loan completes, you’ll have two separate monthly payments.
Your existing mortgage payment continues as before, and the secured loan payment goes to a different company entirely. The two payments don’t combine or interact with each other.
As an example: if you borrowed £75,000 over 15 years, your monthly payment would depend on the interest rate you’re offered. That rate is shaped by your credit score, loan-to-value ratio, and the individual lender’s criteria. Always check the Annual Percentage Rate of Charge (APRC), which captures both the interest and all associated fees, so you can compare deals on a like-for-like basis.
Fees to Budget For
Beyond the monthly payment, you should factor in arrangement fees (which can be 1–2% of the loan amount, though this varies), the valuation fee, and legal fees. Some lenders charge an early repayment charge (ERC) if you pay the loan off before the end of the agreed term. Read the terms on this carefully before you sign.
Some brokers charge a fee for arranging a secured loan. Ask upfront so there are no surprises.
Common Reasons to Take One Out
Lenders view different loan purposes differently, and it’s worth understanding how your intended use might affect your application.
Home Improvements
Applications where the money is going into the property tend to be assessed favourably. An extension, loft conversion, or new kitchen can increase the value of the security the lender holds, which strengthens their position. For that reason, home improvement applications are generally well received.
Debt Consolidation
Using a secured loan to pay off credit cards, personal loans, or other unsecured debts can reduce your total monthly outgoings significantly. The lender may pay your creditors directly rather than releasing the cash to you, to confirm the debts are actually cleared.
Before consolidating, think carefully. You’re converting unsecured debt into debt secured on your home. The monthly payment may be lower, but spreading it over a long term could mean paying more in total interest over the life of the loan. A broker can help you work through the numbers honestly.
Business Funding
Some business owners use a secured loan to inject capital into their business.
Lenders will want to understand how the money will be used and how it supports your ability to repay. Assessment focuses on your personal income and financial position rather than detailed business projections, which can make this a faster and simpler route than a formal business loan for many people.
What Happens if You Want to Move House?
Selling your property while a second charge is in place means the secured loan must be repaid from the sale proceeds before any remaining equity is released to you. This is handled during the conveyancing process.
If you want to keep the loan and move to a new property, two options exist.
The first is to transfer the secured loan to your new home, which requires both the secured loan lender and your new mortgage lender to agree.
The second is to take out a larger mortgage on the new property and use the extra borrowing to repay the secured loan, leaving you with a single mortgage going forward.
Talk this through with your mortgage adviser before making any decisions, as the right answer depends on the rates involved and your new property’s value.
The Risks You Need to Understand
A secured loan is not the same as borrowing on a credit card. Your home is at stake if you don’t repay it.
If you fall behind on payments, the lender can apply for a court order to repossess your property. They sit behind your mortgage lender in the queue, but their charge is still enforceable.
On a variable-rate loan, your payments can also rise if interest rates increase, so factor in some headroom when you’re working out what you can afford.
Before taking out a secured loan, be honest with yourself about your ability to manage the payments long-term, including if your income changed unexpectedly.
The FCA requires lenders to carry out affordability assessments precisely because of this risk, but the responsibility for making a sound decision sits with you too. If you’re in any doubt, speak to an independent mortgage adviser first.
Alternatives Worth Considering
A secured loan isn’t always the best answer. Depending on your circumstances, one of these alternatives might suit you better.
Remortgaging
Remortgaging replaces your existing mortgage, potentially releasing additional funds in the process.
If current mortgage rates are similar to or better than your existing deal, this is worth exploring. The additional borrowing comes at mortgage rates rather than secured loan rates, which is generally cheaper.
The downside is leaving your existing deal. If you’re on a low fixed rate with years still to run, breaking it could cost you significantly through early repayment charges and a higher rate on the new mortgage. Remortgaging also takes longer than a secured loan, usually six to eight weeks.
Further Advance
A further advance lets you borrow more money from your current mortgage lender, added to your existing mortgage account. It preserves your current rate on the original borrowing while adding new funds at today’s rate.
Not all lenders offer further advances, and those that do often have restrictions on amounts or purposes. The process is generally quicker than a full remortgage but slower than a secured loan.
Unsecured Personal Loan
Personal loans are faster and simpler to arrange, and your home isn’t directly at risk if things go wrong. They work well for smaller amounts, up to around £25,000–£35,000 with mainstream lenders.
The trade-off is cost. Interest rates on unsecured loans are higher than secured loans, and rates climb steeply for larger amounts. For borrowing above £15,000–£20,000, a secured loan will usually offer better value, though you need to weigh that against the fact your home becomes part of the arrangement.
Related reading: What’s the Difference Between a Secured and Unsecured Loan?
How a Broker Can Help
A good mortgage adviser will look at your full picture before recommending any particular route.
They’ll compare the cost of a secured loan against remortgaging, a further advance, or unsecured borrowing, taking into account your existing rate, any early repayment charges, and your overall financial position.
Many of the most competitive secured loan lenders only accept applications through brokers. And going direct often means missing the best rates.
A broker can also handle the paperwork, liaise with your existing mortgage lender about consent, and manage the process through to completion.
If you’d like to speak to an independent adviser about your options, we can introduce you to a qualified mortgage broker at no cost to you.
Frequently Asked Questions
They’re the same thing under different names. A secured loan, homeowner loan, and second charge mortgage all refer to borrowing secured against your property in addition to your existing mortgage. The loan is registered as a second charge at the Land Registry, sitting behind your first charge mortgage lender.
The amount depends on your property’s value, your existing mortgage balance, and your income. Most lenders will advance up to 80–85% of your property’s value across all secured borrowing. So if your property is worth £500,000 and you owe £150,000 on your mortgage, you could potentially borrow up to a further £275,000–£300,000, subject to affordability assessment.
No, it doesn’t. Your existing mortgage carries on completely unchanged: same lender, same interest rate, same monthly payment. The secured loan is an entirely separate agreement with a different lender and a separate second charge on the property. The two products run independently of each other.
The process takes four to six weeks from application to receiving the money. This covers the property valuation, underwriting, getting consent from your existing mortgage lender, and completing the legal work. Straightforward cases can complete faster; more complex situations may take a little longer.
Yes, it is possible. The property security means lenders are often more willing to look past a difficult credit history than personal loan providers would be. A poor credit score will usually result in a higher interest rate and possibly stricter terms. Some lenders focus on applicants with adverse credit and are set up specifically to handle those cases.
Yes. Secured loan lenders are generally more flexible with self-employed applicants than personal loan providers. You’ll need to provide accounts or tax calculations to demonstrate your income. The property security means lenders are more willing to consider varied or non-standard income, which can make the secured loan route a good fit for directors, sole traders, and contractors.
