What Is a Secured Loan?
A secured loan is borrowing backed by an asset, which for most expats means UK property. If you do not repay, the lender can take the property to recover what it is owed. Because the lender has that security, secured loans usually cost less than unsecured loans and allow much larger amounts, often into six or seven figures.
In UK property finance the term most often means a second charge loan. This is a loan secured on a property that already has a mortgage. The new lender takes a second legal charge, ranking behind your main mortgage lender. You keep your existing mortgage, with its rate and terms, and borrow extra against the equity you have built up.
For an expat, this can be a useful way to raise money without remortgaging. It can also be a way to borrow when your main lender will not lend more to a non-resident. This guide explains how secured loans work, who they suit, what lenders look for in expats, what they cost, and what can go wrong. It is part of our guide to expat financing. It is general information, not advice. Last reviewed.
First Charge and Second Charge: The Terms
| Term | What it means |
|---|---|
| First charge | The main mortgage. The lender has first claim on the property if it is sold. |
| Second charge | A loan secured on the same property that ranks behind the first charge. |
| Equity | The property’s value minus what you owe on it. |
| Combined loan-to-value (LTV) | The first and second loans together as a percentage of the property’s value. |
| Consent | The first lender’s agreement to a second charge being placed on the property. |
| Regulated / unregulated | Whether FCA consumer rules apply, which depends on the borrower and the purpose. |
Because the first lender is paid first from any sale, a second charge lender takes more risk. That is why rates are generally higher than for a main mortgage.
Secured Loan, Remortgage, Bridging or Unsecured?
| Secured (second charge) | Remortgage | Bridging loan | Unsecured loan | |
|---|---|---|---|---|
| Keeps your existing mortgage | Yes | No, it replaces it | Usually yes | Yes |
| Typical amount | Large, often up to £1m or more | Large | Large | Small, often up to about £50,000 |
| Typical term | 5 to 25 years | Up to 35 years | Months | 1 to 7 years |
| Relative cost | Medium to high | Lower | Highest | High per pound, small amounts |
| Speed | Weeks | Weeks to months | Days to weeks | Days |
| Property at risk | Yes | Yes | Yes | No |
A secured loan sits between a remortgage and a bridging loan. For quick, short-term needs, see our guide to bridging loans for expats. For a long-term replacement of your main mortgage, see expat mortgages.
Why Expats Use Secured Loans
- Keeping a good mortgage rate. If you locked in a low rate years ago, a remortgage could cost you more. A second charge leaves the first mortgage alone.
- Avoiding early repayment charges. Remortgaging during a fixed period can trigger a penalty. A second charge avoids it.
- Raising a deposit. Equity in one property can fund the deposit on another, in the UK or abroad.
- Funding a purchase. Equity can pay for a second home, an investment property or a business premises.
- Refurbishment and improvements. Money to improve or extend a property you own.
- Tax and family needs. School fees, a tax bill or support for relatives.
- Consolidating debt. Combining borrowings into one payment. Be careful: this can stretch short-term debts over a long term and increase the total cost.
- Funding a business. Capital for a venture, where your property is the security.
- Borrowing when your first lender will not. Some first-charge lenders will not lend more to a non-resident, while a specialist second charge lender may.
Who Can Borrow, and on Which Property?
Most secured loans are available to people who own UK property with equity in it. Whether you live in the UK or abroad matters for the lender’s choice, not just your eligibility. Many lenders in this market focus on UK residents, so expats need to find the ones that accept non-residents and your country of residence.
- Your home. If you or a family member lives in the property, the loan is usually regulated, with affordability checks and a period to reflect before you commit.
- A buy-to-let property. Lenders look at the rent, your other income and the loan-to-value. Some regulated rules can apply if you let to family.
- A holiday home. Possible with some lenders, with limits on your own use.
- Commercial or semi-commercial property. Usually unregulated and assessed on the business and the building. See our guide to commercial mortgages.
- Property held in a company. Possible, often with a personal guarantee from the directors.
The property must usually be in England, Scotland or Wales and in reasonable condition. Unusual properties, such as those with a short lease or non-standard construction, may be refused.
Using the Money: Four Common Cases
A deposit for another property. Many expats own a UK home with built-up equity and want to buy elsewhere, in the UK or in the country where they live. A second charge can provide the deposit without selling. Lenders will ask what the money is for, and will want to be sure that the new purchase is affordable alongside the repayments on both loans. If the new property will also be mortgaged, the second lender will want to see how the combined payments fit your income.
Refurbishing or extending a property. Improving a property can raise its value and its rent. If the work is substantial, ask whether the loan can be released in stages, and whether the lender wants to see a budget and quotes. Keep a contingency, because costs often overrun. Where the project is large enough to need planning permission, development finance may fit better.
School fees and family costs. Some expats borrow to pay school or university fees, or to support relatives. These are personal needs, so the loan is likely to be regulated and affordability will be tested closely. Think about whether a long-term loan against your property is the right way to meet a cost that lasts a few years, and what you would do if your overseas contract ended.
Tax bills and cash-flow gaps. A tax bill, a gap between contracts or a delayed payment can create a short-term need. A secured loan can help, but if you only need the money for a few months, the arrangement fees and a longer term may cost more than a bridging loan. Compare the two before you commit. See our guide to bridging loans for expats.
Regulated or Unregulated?
Second charge loans on a home you or your family live in are regulated by the Financial Conduct Authority. That means the lender must check affordability, you receive a standardised illustration of the costs and you get a period to reflect before the loan completes. Loans for business purposes, buy to let held by a company, or other investment purposes are often unregulated, with fewer formal protections. The purpose of the loan, as well as the property, decides which applies. Check the status of the loan and of the firm advising you on the FCA Financial Services Register.
The First Lender’s Consent
Your main mortgage almost always forbids a second charge without the lender’s permission. Before a second charge lender will proceed, it normally asks the first lender for consent. Most first lenders agree, but a few refuse, and some charge a small fee. If you are on a buy-to-let mortgage, check whether the terms limit further borrowing. Raise this early. Consent can take days or weeks, and a refusal is a reason to consider another route, such as a remortgage.
Once agreed, the second charge is registered at HM Land Registry against the property, so anyone looking at the title can see both loans. Both lenders are paid from any sale, with the first lender paid first.
How Much Can You Borrow?
The limit is usually set by combined loan-to-value, which is the first mortgage balance plus the new loan, divided by the property’s value. Lenders commonly allow a combined LTV of around 65% to 75%, and some go to 85% with a higher rate. The best rates tend to be at the lower end. You also need to meet the lender’s tests on income, credit and the purpose of the loan.
Worked example: how much equity is available
The numbers below are invented to show the principle. They are not a quote.
| Amount | |
|---|---|
| Property value | £450,000 |
| First mortgage balance | £180,000 |
| Equity | £270,000 |
| Maximum combined LTV | 75% |
| Maximum total borrowing (75% of £450,000) | £337,500 |
| Maximum second charge (£337,500 minus £180,000) | £157,500 |
The equity is £270,000, but only £157,500 of it can be borrowed at that LTV. The lender will also limit the amount by your income and by the purpose of the loan.
Rates and the True Cost
Second charge rates are generally higher than rates on a main mortgage, because the lender ranks second. They can be fixed or variable, and the margin depends on the combined LTV, your credit profile and the purpose. Expat borrowers may pay more. There is no reliable single rate to quote, so ask for the full cost in writing.
Worked example: the cost of a second charge
These figures are invented to show how cost builds up over time. They are not a quote and not typical of any lender.
| Amount | |
|---|---|
| Existing mortgage | £200,000 at a fixed 2.0% with three years left |
| Extra borrowing needed | £50,000 |
| Second charge rate and term | 8% over 10 years |
| Monthly payment on the second charge | About £607 |
| Total repaid on the second charge | About £72,800 |
| Interest paid on the second charge | About £22,800, before fees |
The alternative is to remortgage the whole £250,000 at a new rate. That might have a lower rate on the extra money but a higher rate on the £200,000 you already had at 2.0%, and an early repayment charge. The right answer depends on the blended cost. A good broker will work through both. Ask for the total repaid over the time you expect to keep the loan, not just the monthly figure.
Remortgage or second charge? Questions to settle it
Start with your current mortgage. What is the rate, and when does the fixed period end? What would it cost to leave early? Next, how much extra do you need compared with what you already owe? A small top-up on a cheap mortgage often favours a second charge, while a large sum, or a mortgage nearing the end of its deal, often favours a remortgage. Then ask which lenders will accept you as a non-resident. A remortgage may be unavailable if your first lender will not lend to you abroad, which leaves the second charge as the practical choice. Finally, work out the blended rate on all the borrowing under each option, plus fees, over the period you expect to hold it. The cheapest rate on paper is not always the cheapest outcome.
Longer terms lower the monthly payment but raise the total interest. Be careful about using a long-term secured loan to clear short-term debts, because you can end up paying for them for decades.
Before you commit, test the plan against a worse case. What happens to your repayments if a variable rate rises by two percentage points? What if your overseas currency falls 15% against sterling? What if your income drops, or your contract ends? If the answer to any of these would put your property at risk, borrow less, choose a fixed rate or lengthen the term. A loan you can only afford in the best case is too large.
Fees and Charges
| Cost | Typical position | What to ask |
|---|---|---|
| Arrangement fee | From nothing up to around £2,000, or a percentage | Is it payable up front or added to the loan? |
| Valuation fee | From nothing up to a few hundred pounds, or more for larger properties | Is it refundable if the loan does not go ahead? |
| Legal fees | From nothing up to a few hundred pounds, more if complex | Do I pay for both sets of solicitors? |
| Broker fee | Varies | Is it paid by me, the lender, or both? |
| Early repayment charge | Varies by product | How much, and for how long? |
| Consent fee | Some first lenders charge one | Does my first lender charge for consent? |
| Exit or redemption fee | Some lenders charge one | What does it cost to close the loan? |
Fees can be added to the loan, which means you pay interest on them. A low rate with high fees can cost more than a slightly higher rate with none.
How Lenders Treat Expat Income and Credit
For a regulated loan on your home, the lender must check that you can afford the repayments. For expats that means looking at your overseas income, the currency it is paid in and how stable it is. Lenders often count only part of income paid in a foreign currency, to allow for exchange-rate swings. Sterling, US dollars and euros are generally easiest. Self-employed borrowers need accounts or tax returns, usually for two years.
For unregulated loans, lenders place more weight on the property, the loan-to-value and the exit, and less on income. Credit history matters less than for a first mortgage, and some lenders will consider past problems, though the pricing may reflect the risk. Keeping a UK bank account and address helps in all cases.
Does Your Country of Residence Matter?
Yes. Lenders keep lists of countries they accept and the lists change. The lender may also need documents it can verify, such as proof of address and income in a form it recognises. Some countries are excluded because of sanctions or anti-money-laundering rules. Where you live is the first thing to check, not the last. We will publish guides for the countries our clients live in most.
Documents You Will Need
- Passport and proof of your overseas address
- Your latest mortgage statement, with the balance and the rate
- Evidence of income: payslips, an employment contract, accounts or tax returns
- Three to six months of bank statements
- Details of other debts and monthly commitments
- Proof of the property’s value or details for a valuation
- The purpose of the loan, and for business use, a plan or accounts
- For company borrowers, structure and director details
Some lenders ask for certified copies of ID or original signatures. Documents in another language may need translation. Ask for the full list at the start to avoid delays.
The Process, Step by Step
- Decide how much you need and what it is for.
- Check your mortgage terms for any limit on further borrowing, and any early repayment charge.
- Speak to a broker who works with lenders that accept your country.
- Get illustrations or indicative terms, and compare the total cost.
- Apply, with your documents.
- The lender asks your first lender for consent and arranges a valuation.
- For a regulated loan, you receive the offer and a period to reflect.
- Solicitors complete the legal work and register the charge.
- Funds are released.
A typical case takes two to four weeks, but overseas documents, first-lender consent and valuations can add time.
Risks to Understand
- Your property is at risk. If you do not keep up repayments, the lender can take possession and sell it.
- You rank behind the first lender. If the property sells for less than expected, the second lender may not be repaid in full, which is why pricing is higher.
- Rates can rise. Variable-rate loans can become much dearer, and a fixed rate may end before the loan does.
- Currency risk. If you repay in sterling from income in another currency, a fall in that currency raises the real cost.
- Total cost. A long term and high rate can mean paying back a lot more than you borrowed.
- Two lenders to manage. A problem with one can affect the other.
- Selling becomes harder. You must repay both loans, and any redemption fees, from the sale.
Alternatives Worth Comparing
- Remortgage. Replace your whole mortgage and borrow more. Often cheaper if your current rate is high, but not if you are on a low fixed rate.
- Bridging loan. Faster, for short-term needs with a clear exit. See bridging loans for expats.
- Unsecured loan. No property at risk, but smaller amounts and higher rates.
- Downsizing or selling. Releasing equity without borrowing.
- Savings. Often the cheapest source, if you have enough and keep a reserve.
Tax and Related Planning
Interest on a loan to improve or buy a rental property may be deductible against rental income in some cases, and not in others. The rules depend on what the money is used for and how the property is held. Interest on a loan for personal spending is not usually deductible. Your country of residence has its own rules too. Take advice from someone who understands both countries before you borrow.
Because your property is the security, think about what would happen to the loan if you died or could not work. Our expat mortgage protection guide and expat insurance guide explain the options. Never use a loan secured on your home to fund an investment that you do not fully understand, and be cautious of anyone who suggests it as a way to unlock your pension. See our guide to UK pensions for expats.
Common Mistakes to Avoid
- Comparing monthly payments only. A longer term makes payments smaller but the total much bigger.
- Forgetting the first lender. Failing to ask for consent early can derail the loan.
- Ignoring early repayment charges. Check the cost on both loans.
- Consolidating short-term debt into a long-term loan. You may pay more in total.
- Borrowing the maximum. Leave a margin for rate rises and exchange-rate falls.
- Applying to several lenders at once. Each credit search is recorded.
- Not telling the lender about your plans. Letting out a home or moving abroad can breach the terms.
- Leaving out protection. Without cover, your family is exposed.
- Skipping advice. Check who is advising you and how they are paid.
Choosing a Broker
Second charge lending is a specialist market, and most expats use a broker. A good one should be authorised by the FCA for this type of advice, explain how they are paid, compare more than one lender, show you the total cost over the term and be willing to say if a remortgage or no borrowing at all is better. Be wary of anyone who promises approval before seeing your details, asks for fees before any work or pushes you to act quickly.
Frequently Asked Questions
1. What is a secured loan?
A loan backed by an asset, usually property. In UK property finance it often means a second charge loan secured on a property that already has a mortgage.
2. What is a second charge mortgage?
A loan secured on a property behind your main mortgage. You keep the first mortgage and borrow extra against your equity.
3. Can an expat get a secured loan on UK property?
Yes, with lenders that accept non-residents. The choice is narrower and each has its own country list.
4. How much can I borrow?
It depends on the combined loan-to-value, usually around 65% to 75% and sometimes more, and on your income and the loan’s purpose.
5. Are secured loan rates higher than mortgage rates?
Generally yes, because the lender ranks behind the first lender. Rates depend on your LTV, credit and purpose.
6. Does my first lender need to agree?
Usually yes. The second charge lender normally asks for the first lender’s consent.
7. How long does it take?
Often two to four weeks, but overseas documents and consent can add time.
8. What can I use the money for?
Many things, including property purchases, refurbishment, tax bills, family needs, debt consolidation and business funding. The purpose affects whether the loan is regulated.
9. Is a secured loan regulated?
If it is secured on a home that you or your family live in, usually yes. Business and investment loans are often not.
10. Can I borrow against a buy-to-let property?
Yes, with lenders that accept it. They look at the rent, your income and the combined LTV.
11. Will it affect my credit score?
A new loan is recorded on your credit file, and missed payments harm your score. Repaying on time can help.
12. Can I get a secured loan with a poor credit history?
Possibly. Lenders look at the equity and the purpose, but pricing may reflect the risk.
13. How is it different from a remortgage?
A remortgage replaces your main mortgage. A secured loan sits alongside it, so your existing rate and terms stay.
14. How is it different from a bridging loan?
A bridging loan is short term and repaid from an exit. A secured loan runs for years with regular repayments.
15. What fees should I expect?
Arrangement, valuation and legal fees, plus any broker fee and any early repayment charge. See the fees table above.
16. Can I overpay or repay early?
Often yes, but early repayment charges may apply during a fixed period. Check the terms.
17. What happens if I cannot keep up repayments?
The lender can take action, up to repossessing the property. Talk to the lender early if you are in difficulty.
18. What term can I choose?
Commonly 5 to 25 years. Longer terms mean lower payments but more interest overall.
19. Do I need UK income?
Not always. Regulated loans need affordability checks, and lenders may accept foreign income with evidence. Unregulated loans place more weight on the property.
20. Which countries do lenders accept?
Each lender has its own list, and the lists change. Check yours first.
21. Can I use the loan to buy another property abroad?
Sometimes, but the purpose affects the lender’s decision and the rules. Tell the broker up front.
22. Can I borrow through a company?
Yes, for some properties. Lenders often require personal guarantees from the directors.
23. Is interest tax-deductible?
Sometimes, depending on the purpose and how the property is held. Take tax advice.
24. Do I need life insurance?
Not always required, but worth considering when your property is the security. See our guide to expat mortgage protection.
25. Do I need a broker?
Not by law, but the market is specialist and a broker can compare lenders. Check they are authorised and ask how they are paid.
Glossary
- Secured loan: a loan backed by an asset such as property.
- First charge: the main mortgage, with first claim on the property.
- Second charge: a loan that ranks behind the first charge.
- Equity: the property’s value minus what you owe on it.
- Combined LTV: total borrowing on the property as a percentage of its value.
- Consent: the first lender’s agreement to a second charge.
- Early repayment charge: a fee for repaying during a fixed period.
- Redemption: repaying a loan in full to remove the charge.
- Reflection period: time to think before a regulated loan completes.
- Land Registry: the register where charges over property are recorded.
Thinking About Borrowing Against Your UK Property?
Speak to us before you apply. We will look at your mortgage, your equity and where you live, and tell you whether a secured loan, a remortgage or another route is likely to work best. Request a callback.
Risk warning: Your home or property may be repossessed if you do not keep up repayments on a mortgage or other loan secured on it. Think carefully before securing other debts against your home. Rules and lender criteria can change and depend on your circumstances.