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Why a second charge loan?

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Funding major home improvements and dealing with changes in circumstances are among the main reasons homeowners take out second-charge mortgages.

While they won’t be the right option for everyone, these loans can make sense in specific circumstances, such as the following:

  • You have a very low interest rate on your main mortgage, and you’d need to re-mortgage to a more expensive rate to access extra funds.
  • Your current mortgage has a very high early-repayment charge.
  • Your existing lender only offers products that are more expensive than second-charge products.
  • Your credit rating has dropped, meaning re-mortgaging might be more expensive.

Reasons to avoid a second-charge mortgage

You should avoid taking out a second-charge mortgage if any of the following applies:

  • You can raise funds more cheaply by re-mortgagingor getting a personal loan.
  • You’re only just managing to meet your current mortgage repayments.

Rates available

The cost of second-charge mortgages has dropped significantly in the past year or two, meaning you can now get a product taking you up to 70% LTV at a rate of less than 4%.

Both fixed-rate (for periods of two or five years) and variable-rate (based on the lender’s standard variable rate – SVR – or the base rate plus or minus a certain margin) deals are available, though the cheapest rates right now are on variable products.

Help?

Second charge loans do not suit every need and it’s vitally important any potential borrower seeks professional independent advice from a qualified adviser. If you would like to discuss a potential loan please do contact one of our fully qualified advisers.

 

 

 

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Second charge loan costs reducing

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The costs of second charge finance in 2019 is likely to be less expensive than last year, great news for the borrower indeed.

Interest rates and fees have reduced significantly over the last six months as finance companies battle for a slice this ever-growing market. The market is also seeing new incentives added to packages including assistance in funding any survey costs that may be required. These measures are normally reserved for the main mortgage market, but there are far more offers creeping into the “seconds” sector.

2019 got off to a flyer as more and more people see this type of financing as a very efficient way to go forward. Brokers up and down the country are reporting clients wanting to seek alternative ways to raise extra funds than the traditional re-mortgage.

With the promise of quicker completions from the lenders the “seconds” market most certainly looks to have a strong and ever-growing future.

If you are contemplating raising finances in the near future it would do no harm to find out whether this type of funding could assist you. Second charge lending has become a cost-effective alternative to re-mortgaging, completing quicker and in most cases have far cheaper set up costs.

Find out more

We pride ourselves on service, so if you need any assistance or want to discuss a potential deal do call us. Our expert independent advisers are experienced in all areas of lending and look forward to being of assistance.

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Unsecured loan or Secured loan (second charge)

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Do you know the difference?

When asked a survey of 1000 homeowners from all walks of life alarmingly showed 54% had no idea what the difference was.

Below may help make thigs a little clearer, but the clear message is, if you want to borrow money seek an independent advisers advice. This action could save you thousand of pounds in the long term.

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 the 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.

Assistance?

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

 

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Increased lender competition is driving product development forward

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Steady progress is the theme of the day in the second charge mortgage market. It is becoming more and more of an attractive alternative to the first charge market.

Lender competition is increasing, which is driving product development. A number of lenders are also introducing new fixed rate loans with no early repayment charges.

Service is another area in which competition is hotting up, with more lenders introducing automated valuation models instead of the full valuation or drive-by valuation that had previously been required.

As part of FCA regulation, income verification has become more rigorous, so lenders are focusing on improving other parts of the process to ensure overall service levels are not impacted.

And, of course, with greater competition comes lower rates. At the time of writing, the lowest published rate for a second charge loan is under 4%, which is comparable with some first charge mortgages.

Realistically, it is unlikely rates can be driven much lower but, at current levels, second charge loans provide an attractive solution for clients in a number of situations.

Why a second charge and not to re-mortgage?

There are many borrowers on a lifetime tracker or variable rate so low they would be unable to match their current rate by re-mortgaging. For clients in this situation who want to raise extra money from their property, it can sometimes be more cost effective to use a second charge loan to borrow rather than shift the entire balance onto a more expensive rate.

Some first charge lenders have lost their appetite for debt consolidation and we are currently seeing a lot of demand for second charges in this area, particularly given rates are so competitive. It is so easy to run-up unsecured credit nowadays and we have worked with a lot of people who are near breaking point because of the strain of meeting the monthly payments.

By moving the balances onto a cheaper second charge loan, borrowers can immediately relieve some of the strain while they work towards a long-term solution to manage their debts. But always remember this form of loan to consolidate debt is not always the solution, do speak to a professional independent broker who will be able to guide you in the correct direction.

Need help?

If you would like to know more please make contact and one of our independent advisers will be pleased to assist.

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Second charge lending is completing even quicker

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Second charge lending continues to grow in stature month on month as homeowners look for loans at affordable rates.

A recent survey of homeowners looking to borrow found in order of priority:

Survey findings

  • Monthly cost, interest rate
  • Speed of completion
  • Set up charges
  • Ease of application
  • Early redemption fees

One of the big appeals of a second charge loan is it meets all the surveys key facts such as costs and speed. On average a second charge loan is completed within 15 working days, this does of course vary dependant on the complexity. This financial year has also seen a significant reduction in set up costs plus interest rates are at the lowest ever recorded.

Second charge lenders have been quick to recognise the importance of speed in completing a deal as competition increases.

There is no doubt second charge lending has just had its most successful year, the good thing is lenders have taken this on board and reacted positively to meet the challenges.

Borrowing money these days is a very complex issue, a second charge loan could be just what you need but please do understand it may not suit every need. Best advice is to seek professional independent advisor assistance.

Need some assistance

If you think this type of loan could assist you with your future planning make sure you get the right one to suit your needs. There are many different lenders offering numerous second charge loans so please do call our qualified advisers who will be happy to help.