What makes a secured loan different to a mortgage?

Mortgages and secured loans both use your home as collateral, but they are designed for different purposes. Understanding the differences between them can help you decide which one suits your financial needs.

How do mortgages and secured loans compare?

Both use your home as security, but they help with different money needs. Let's see how they stack up!

Quick look: Mortgages vs. Secured loans

What to know	Mortgages	Secured loans
What they're for	Buying a home	Home upgrades, consolidating debts
How much they cost	Lower rates (3-6%)	Higher rates (5-12%)
Which gets paid first	Always first	Second, after mortgage
How much can you borrow?	£25,000 and up	£10k to £500k
How long to pay back	25-35 years	5-30 years

How they're alike

✅ Both use your home as security
 If you can't make payments, the lender might take back your home.

✅ Both let you borrow more money
 Much more than personal loans, and you get longer to pay it back.

✅ Both offer fixed or variable rates
 Fixed rates keep your payments the same each month.

✅ Both can take a long time to apply for
This is often due to the legal work involved and checks to make sure you can afford the repayments.

All about mortgages

A mortgage helps you buy a home. Here's what you need to know:

• They have the best rates (usually 3-6%)
• You can borrow most of your home's value (up to 95%)
• They last a long time (up to 35 years)
• They get paid first if your home is ever sold to cover debts
• You can borrow from £25,000 to millions (based on what you earn and the cost of the house)

The lender will check that the home is worth what you're paying for it.

All about secured loans

A secured loan (also called a second charge mortgage) lets you use the value in your home without changing your mortgage.

• They cost a bit more than mortgages (5-12%)
• They get paid second after your mortgage
• They don't last as long (5-30 years)
• You can borrow between £10,000 and £500,000
• You can borrow up to 85% of your home's value (including your mortgage)

What does "second charge" mean?

A mortgage is known as a first charge loan — it gets priority if your home is sold to repay debts.

A secured loan is usually a second charge loan, meaning it sits behind your mortgage. If you fall behind on payments and your home is sold, your mortgage lender is paid back first, and the secured loan lender is paid from whatever is left.

For example: If your home is worth £300,000 and you owe £200,000 on your mortgage, you may be able to borrow up to £55,000 as a second charge loan. That’s because many lenders will let you borrow up to 85% of your home’s value in total (£255,000), minus what’s already owed on your mortgage.

The bottom line: what's the difference?

Mortgages and secured loans both use your home as security — but they’re used for very different things.

• A mortgage is what you use to buy a home.
• A secured loan is what you might use if you already own a home and want to borrow more.

If you’re buying a home, you’ll need a mortgage.

If you already have one and want to release equity, you could consider either a secured loan or remortgaging, depending on your circumstances.

Not sure what to do? Talk to a mortgage adviser who can help you choose the best option for your situation.