A better choice of lending?

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More people than ever before are turning to a second charge mortgage to raise funds rather than taking out a personal loan or re-mortgaging.

 What is a second charge mortgage?

Second charge mortgages are becoming increasingly popular, with the number of people opting for one at its highest level since 2008. They allow you to borrow a lump sum secured against your property which you repay alongside your existing mortgage over a fixed term.

Many people use them to raise money as an alternative to a re-mortgage.

How do you qualify?

To qualify for a second charge mortgage you must be a home owner, although you don’t necessarily have to be living there. While a first charge mortgage is based on a number of factors, including your deposit, credit score and ability to pay each month, a second charge mortgage is based on the equity available in your property.

Equity?

This is the percentage of your home owned outright by you. You can work this out by calculating the amount you owe on your property against the value of it. So, if your property is worth £300,000 and you still have to pay off £200,000 on your mortgage, you have £100,000 in equity.

You don’t need to have a high credit rating, in fact you might even be able to get one with a low score. This is because lenders look more favourably on borrowers with a poor credit rating if they are prepared to borrow against their home. The typical minimum term is three years and the maximum is 30 years and they can be paid off alongside your existing mortgage. You can borrow from £1,000 (varies from lender to lender) upwards and the greater the equity in your property, the more you will be able to secure.

Like to know more?

If you would like to know more please do make contact and one of our qualified advisers will be happy to help.

Boom start to the year!

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Second charge mortgage business volumes grew in the first three months of the year, according to figures published by the Finance & Leasing Association.

It said that £195m was lent in second charge mortgages in the first three months of this year, which was10% more than the same period last year.

In terms of sales volumes, there were 4,522 second charge loans lent to borrowers, 14.6% up on a year earlier.

What are second charge mortgages?

The mortgages are taken out by borrowers to run in addition to their existing mortgage and can be a useful way to raise funds without disturbing your current deal, or to consolidate debt.

They usually have a shorter term than a mortgage and are similar to personal loans. However, unlike high street or unsecured loans, second charge mortgages are secured against your property. As the loan is secured against a property it is likely interest charged will be less than an unsecured loan.

Helpful for the self employed

If you are self-employed and have a current mortgage a second charge loan could be just the help you are looking for. Second charge loans are fast to complete and far more flexible than any re-mortgage. A second charge loan offers a quick affordable solution to raising cash secured on your home.

Why choose a second charge loan?

  • Faster to complete than a traditional re-mortgage.
  • Normally less fees.
  • Very attractive interest rates.
  • Loans are very flexible.
  • Ability to retain current mortgage deal if on a low rate.
  • Helps the self-employed

 Like too know more?

Our advisers are fully trained and skilled in all areas of lending so please do contact us to discuss any requirements you may have.

Unsecured loan v’s secured (second charge)

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An unsecured loan is not protected by any collateral or guarantee, so should you default on payments the lender can’t automatically take your property or assets. They can be offered to people who don’t own property and that makes them available to a much wider range of borrowers. They are flexible, and you can choose the amount and over what time period you repay your loan.

You can apply for an unsecured loan generally if you are aged over 18, irrespective of whether you are a homeowner, but you may be asked for a Guarantor who has a good credit history. The interest you pay back depends on the amount you borrow; the interest rates will normally be much higher than the secured loan option.

A secured loan generally can be advanced for car loans and mortgages, It’s often referred to as a homeowner loan or second charge because the debt is linked to the borrower’s property.

The amount you can borrow and repayment terms offered on a secured loan is linked to your personal circumstances and the amount of “free equity” you have in your property. Free equity is the difference between the amount you owe on your mortgage and the value of your property. As an example, if your property is valued at £200,000 and you have a mortgage of £100,000 your free equity is £100.000.

You can generally borrow more with a secured loan, it is likely to be at a lesser interest rate than an unsecured loan, but should you default on your payments you risk losing your property.

Important

If you want to secure a loan for any reason it is highly recommended to seek broker advice as the choices are vast and can be very confusing. A broker will listen to your needs and assess the best option to suit your circumstances now and in the future.

Assistance?

If you would like to speak to a qualified adviser, please do make contact and they will be happy to help.