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Secured Loan Glossary: A-Z of Second Charge Mortgage Terms

Secured loan and second charge mortgage applications involve a lot of specialist terminology. This A-Z glossary explains every term you are likely to encounter — from APR and CLTV to SA302, TOLATA, and redemption statements — in plain, jargon-free English.

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A to D: APR, APRC, CCJ, CLTV, DIP

AIP (Agreement in Principle) / DIP (Decision in Principle): An initial indication from a lender that they would, in principle, be willing to lend a specified amount subject to full underwriting. Issued on the basis of self-declared information and typically a soft credit search. Does not commit either party to the transaction. Also called a Mortgage in Principle (MIP) in the first charge market.

APR (Annual Percentage Rate): The annual cost of borrowing expressed as a percentage, including the interest rate and certain mandatory fees, standardised to allow comparison between products. Required by law to be shown in advertising alongside any headline rate. The representative APR is the rate at which at least 51% of successful applicants are offered the product.

APRC (Annual Percentage Rate of Charge): A broader version of APR used for mortgage and secured loan products, incorporating all compulsory costs including arrangement fees, valuation fees, and legal fees spread over the full loan term. More useful for comparing the true total cost of different secured loan products.

CCJ (County Court Judgement): A court order confirming that a debt is owed. CCJs are registered at the Registry of County Court Judgements and appear on the borrower's credit file for six years. A CCJ does not automatically prevent a secured loan application, but it will result in higher rates and reduces the range of lenders willing to consider the application. Satisfied CCJs (where the debt was paid) are viewed more favourably than outstanding ones.

CLTV (Combined Loan-to-Value): The total of all loans secured against a property — typically the first charge mortgage balance plus the proposed second charge — expressed as a percentage of the current property value. Most secured loan lenders cap at 80–85% CLTV. The CLTV is the primary driver of the LTV tier used to determine the interest rate offered.

DMP (Debt Management Plan): An informal arrangement between a borrower and their unsecured creditors, typically administered by a debt advice charity or commercial debt management company, under which monthly payments are made at a reduced and affordable level. A DMP is not a legal arrangement but is recorded on the credit file and affects secured loan eligibility. Most specialist lenders will consider DMP applicants, particularly where the DMP is nearing completion.

E to L: ERC, First Charge, IVA, LTV, Legal Charge

ERC (Early Repayment Charge): A charge levied by the lender when a loan is repaid before the end of the agreed product term, typically a fixed-rate period. Expressed as a percentage of the outstanding balance, often reducing each year. For example, 3% in year one, 2% in year two, 1% in year three. ERCs compensate the lender for the loss of future interest income on early redemption.

First Charge / First Charge Mortgage: The primary mortgage on a property. In the event of default and sale, the first charge lender is repaid before any second charge holder. The majority of homeowners' mortgages are first charges. The first charge lender must consent to any second charge being placed on the same property.

IVA (Individual Voluntary Arrangement): A formal insolvency procedure agreed between an individual and their unsecured creditors, administered by an insolvency practitioner. IVAs appear on the Insolvency Register and on the credit file for six years. A discharged IVA (one that has been completed) is viewed differently from an active IVA. Some specialist secured lenders will consider discharged IVA applicants with sufficient equity.

Legal Charge: The formal legal instrument that gives the lender security over a property. Registered at the Land Registry. The first charge is registered first; the second charge (secured loan) is registered second. The legal charge entitles the lender to take possession of the property and sell it in the event of default, following the statutory and regulatory process.

LTV (Loan-to-Value): The ratio of a loan amount to the value of the property securing it, expressed as a percentage. For a secured loan, lenders typically refer to CLTV — the combined LTV across both the first mortgage and the proposed second charge — rather than the standalone LTV of the secured loan itself. Lower CLTV attracts lower interest rates.

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M to R: MCOB, Mortgage Deed, P60, Redemption Statement, RIO, SA302

MCOB (Mortgage and Home Finance Conduct of Business sourcebook): The FCA's rulebook for regulated mortgage and secured loan lenders and brokers. Sets out requirements for responsible lending, disclosure, forbearance, and conduct. Second charge mortgages became subject to full MCOB regulation in March 2016, raising standards significantly above the previous consumer credit regime.

Mortgage Deed: The legal document signed by the borrower granting the lender a charge over the property. Must be witnessed and signed in accordance with Land Registry requirements. The deed is registered at the Land Registry to create the legal charge. For a secured loan, the deed is a second charge mortgage deed rather than a first charge deed.

P60: An annual summary of total earnings and tax paid, issued by an employer at the end of each tax year (5 April). Required by most secured loan lenders as confirmation of annual income for employed applicants. Lenders typically want P60s for the last one to two tax years alongside recent payslips.

Redemption Statement: A document issued by the lender showing the exact amount required to repay the loan in full on a specified date. Includes outstanding capital, accrued interest to the redemption date, any ERC, and administration fees. Valid for a stated period (typically 30 days). Requested by a conveyancer when a sale or remortgage is being completed.

RIO (Retirement Interest Only) Mortgage: A first charge mortgage designed for older borrowers, on which only the interest is paid monthly and the capital is redeemed when the property is sold — typically on death or a move into care. A specialist product for borrowers who do not qualify for standard interest only lending but do not want the roll-up structure of equity release. Relevant as an alternative to second charge borrowing for older homeowners.

SA302: The HMRC tax calculation form generated after a self-assessment tax return is filed. Shows total income, tax liability, and the breakdown of income types (employment, self-employment, dividends, rental, etc.). Required by most secured loan lenders for self-employed applicants as primary income evidence. Available from the HMRC online account or from an accountant.

S to T: Second Charge, TOLATA, Deed of Trust, Completion Statement

Second Charge / Second Charge Mortgage: A loan secured by a legal charge over a property that already has a first charge (mortgage) registered against it. The second charge lender is junior in priority to the first charge lender — in a sale or repossession, the first charge is satisfied before the second charge receives any proceeds. Secured loans and second charge mortgages are the same product described by different names.

Completion Statement: A document prepared by the lender and/or solicitor at the point of loan completion, summarising the loan amount advanced, the interest rate, the monthly payment, the total amount payable, all fees deducted, and the net funds released to the borrower. Must be provided to the borrower before or at completion under FCA disclosure requirements.

Deed of Trust / Declaration of Trust: A legal document that sets out how the beneficial ownership of a property is divided between co-owners, particularly where the split differs from the legal title. For example, a property held in joint names as tenants in common with a 70/30 beneficial split. A deed of trust is relevant in secured lending when the lender needs to understand the security structure and whether all beneficial owners have consented to the charge.

TOLATA (Trusts of Land and Appointment of Trustees Act 1996): The legislation governing disputes over jointly owned land and property in England and Wales. Relevant in secured lending when joint owners disagree about selling or charging a property. Under TOLATA, a court can order a sale even if one owner objects, though the court has discretion and will consider all circumstances. Lenders and borrowers involved in disputes about jointly owned secured property should take legal advice on TOLATA implications.

HMO (House in Multiple Occupation): A property rented to three or more unrelated tenants sharing facilities. HMOs require a specific licence from the local authority and are classified differently from standard residential properties by most secured loan lenders. Fewer lenders will consider an HMO as security and specialist advice is needed for HMO-secured loan applications.

Important: Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual rate available will depend on your circumstances. Think carefully before securing other debts against your home.

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Frequently Asked Questions

They are the same product. A secured loan is the consumer-facing marketing term; a second charge mortgage is the FCA regulatory classification. Both describe a loan secured by a legal charge over a property that already has a primary mortgage (first charge) on it. Since March 2016, both terms describe a product regulated under the FCA's MCOB rules, which provides borrowers with the full suite of regulated mortgage consumer protections.

CLTV is Combined Loan-to-Value — the total of your first mortgage balance and proposed secured loan balance divided by your property value, expressed as a percentage. It matters because lenders use it to assess their risk. Most secured loan lenders cap CLTV at 80–85%, and the rate you are offered is determined by the CLTV tier you fall into. A lower CLTV means lower risk for the lender and typically a lower interest rate for you.

A redemption statement is a document from your lender showing the exact amount required to repay your secured loan in full on a specific date. You need one when you sell your property (your conveyancer will request it), when you remortgage, or when you want to calculate the cost of paying off the loan early. It includes the outstanding capital, interest to the redemption date, any ERC, and any fees. It is valid for typically 30 days, after which a new statement must be requested.

A CCJ (County Court Judgement) is a court order confirming a debt is owed and appears on your credit file for six years. It does not automatically prevent a secured loan, but it reduces the range of lenders available and will result in higher rates. Specialist lenders including Together Money, Pepper Money, and Shawbrook consider CCJ applicants, with better terms for satisfied CCJs and for those where the CCJ is older and the overall credit profile shows recovery. The amount of the CCJ, its age, and whether it is satisfied are all factors.

An IVA (Individual Voluntary Arrangement) is a formal insolvency process. An active IVA makes secured lending very difficult, as the IVA supervisor typically has to consent to new secured borrowing and many lenders will not lend during an active IVA. A discharged IVA — one that has been successfully completed — is treated more favourably by specialist lenders, particularly where significant time has passed since discharge and the borrower has substantial equity. A whole-of-market broker specialising in adverse credit secured lending can identify options for discharged IVA applicants.

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