Confused? What is a second charge mortgage?

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A second charge mortgage is a loan borrowed against your home, on top of your existing mortgage. As the second charge is secured against your property, you need to have sufficient equity in your home to support the loan.

If you were ever to default on your repayments and have your home repossessed and sold, the ‘first charge’ mortgage lender would get their money back first, and the ‘second charge’ lender would be paid back after the mortgage and potentially other secured loans have been repaid.

As the second lender is taking a higher risk, second charge loans are usually charged at slightly higher interest rates than mortgages. But they are a great deal cheaper than unsecured personal loans that is for sure. So, it is obvious why you might choose a second charge over a personal unsecured loan. But why would you consider a second charge loan, rather than simply re-mortgaging and borrowing more on your first charge loan?

Second charge loan or a re-mortgage

You are paying an extremely low mortgage rate.

Thousands of mortgage borrowers in the UK are on exceptionally low lifetime tracker mortgages taken out pre-2008, paying less than 2%. If you are on one of these deals and you want to borrow, say £30,000 extra, your mortgage lender may offer you the extra cash but insist that you re-mortgage the whole deal onto a higher interest rate.

You need a quick turnaround.

It can take several weeks to organise a re-mortgage. If you require extra finance in a hurry, going for a second charge will be the quicker and cheaper option available to you.

Can we help?

Need to know more? Please do contact us and one of our independent advisers will be happy to assist.

Raising funds in a cost-effective way

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Have you woken up with a bit of a financial hangover after all that festive spending and the Covid-19 problems?

Perhaps you have got plans for the year ahead and want a cash injection to fund things, or maybe you need a new car or home appliance to get the New Year off to a great start? Well, whatever your reasons for needing a loan, you can now snap one up for the cheapest ever rate.

There is a great choice of loans available these days but do be careful, a lot of the unsecured deals carry heavy interest rates. Secured lending (second charge) can be very cost effective indeed with record low interest rates currently on offer.

They are relatively easy to apply for and funds can be released much quicker than a traditional re-mortgage.

Lowest loan rate on record 2021

This is the lowest that secured loan rates have fallen, which will delight borrowers looking to consolidate their debts. It has come at a particularly difficult time of year for those who may be stressed over their finances and spending too much over Christmas – paying off an expensive overdraft or credit card should become a priority moving into the new year, so these low rates are likely to attract many consumers.

It is worth pointing out that these record-low rate second charge loans are unlikely to be around much longer as experts are predicting general rate rises all round. So if you are looking to raise funds it could be a good idea to act sooner rather than later.

Can we help?

If you are looking to raise funds and require help please do contact one of our independent advisers and they will be pleased to guide you.

More choices in the second charge market

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It is without doubt that secured lending popularity is increasing on a daily basis. Second charge mortgages have increased month on month and continue to do so.

Before you take out a loan of any kind make sure you check whether this form of lending could help you.

Unsecured lending (payday lenders) is so expensive when you analyse the annual interest rates on offer. Homeowners are waking up to this fact and switching to the cheaper and safer secured lending option. 

The largest growth area of loans is to the self-employed and the good news is there are plenty of different plans to suit each individual case. Loans can be fixed for various terms which can give peace of mind or you may wish to just take the standard discounted variable rate.

Second charge lending is so easy and quick to secure, lenders are increasing their portfolios at a rapid rate. An average case presented will complete in approximately 18 working days, as you can see this is so much quicker than the standard re-mortgage.

We are seeing different lending plans emerge daily and this can only be good news for the borrower. Interest rates and fees are reducing as lenders see this market as a growth area in the longer term.

Need some assistance?

If you think this type of loan could assist you in your future planning it is particularly important to ensure you get the correct deal to suit your needs. There are many different lenders offering numerous second charge loans so please do call our independent advisers who will be happy to help you achieve the correct loan for your needs.

Homeowners are in a very strong position

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The latest data released has revealed that the average value of a residential property across the country is at an all-time high. This information puts the homeowner in a strong position if they are contemplating raising finance and using the home as security.

Homeowners have choices if they wish to raise capital, they could re-mortgage or take out a second charge loan secured on the equity within the property.

Second charge lending has made huge strides in the last 3 years and now should be considered before any decision is made about re-financing your property.

Second charge lending offers a fast and effective way to raise capital at a very reasonable cost. Interest rates and set up costs offered by lenders have reduced significantly over the last couple of years in line with the mortgage market.

In the past re-mortgaging was by far the most popular route taken when fund raising was required but not anymore.

The range of second charge loans are increasing every day with more flexible repayment methods being offered which has found favour with the borrower. Repayment periods are flexible and are generally set to suit the client’s wishes.

Help required?

Please do contact us for any assistance you may require as choosing the correct loan to suit your needs can be a daunting task.

Do you have an expensive loan you want to clear?

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2020 saw a sharp rise in the number of homeowners looking to utilise a second charge loan to consolidate their expensive long-term unsecure debt.

This notable growth in the level of household debt, alongside record low rates on second charge products, are combining to boost demand for second charge loans.

2021 has seen the trend for second charge demand increase again as borrowers are shifting away from expensive shorter term unsecured loans. It would seem the so called “pay day” lenders are far less attractive to the homeowner due to the extremely high interest rates being charged.

A second charge loan will not suit all needs, debt consolidation is a complex issue and needs to be researched to ensure the best deal is found.

As an example, borrowers who are paying a low interest rate on their main mortgage, or they are within an early repayment charge period, a second charge mortgage can be the most sensible way to consolidate that expensive debt.

There are now a lot lower rate second charge products on the market than ever before due to lenders recognising the growth in this form of lending.

Lending these days is a very confusing area for most consumers with so many alternatives available. It is highly recommended that anyone considering taking out a new loan should seek independent professional advice as a mistake could prove very costly in the long run.

Can we help?

If you are considering taking out a secured loan, please do make contact and one of our fully qualified independent advisers will be happy to assist.

Second charge lending is getting a lot of attention

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There has been a flurry of activity in the second charge loan sector recently as lenders look to re-price their products downwards. We are pleased to inform you second charge loans are at their lowest rates the sector has ever seen.

Great news for borrowers indeed, this is without doubt one of the contributing factors to second charge’s rapid growth over the last five years. This type of loan has been getting less expensive as competition for business intensifies, plus new funding sources are coming into the market rapidly.

Lenders are now looking for ways to attract more business and we are now seeing a lot of new offers creeping into this expanding form of lending.

Speed of funding is crucial

We are always asked with virtually every case we do “how quickly can this be done”. The answer is every case will vary due to the complexity of the deal. The average time currently to complete on a “straight forward loan” is 18 working days.

To help complete the case quickly clients should follow these golden rules.

Good fast communication.

Online contact details.

Return applications rapidly.

Easy access to the property for the survey.

Internet access.

Need some advice

If you require assistance with your next loan please do call one of our expert independent advisers who will be happy to help.

Seconds are very progressive

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Second charge mortgages are becoming a progressively more competitive way for borrowers to raise funds on their existing property, and product innovation means that there are more ways for clients to access a second charge mortgage.

For example, a growing number of landlords are choosing to raise capital with a second charge on a buy-to-let property and there is a growing range of options for clients.

We are also seeing a rise in second charge mortgages that take an equitable charge on the property. With an equitable charge, the lender does not take a legal stake in the property, but instead is given the right for a judicial process of recovery, which means that an equitable charge can be used where the first charge lender declines their consent to a second charge being registered. It even means that equitable charge mortgages are available to clients who have bought their home using a Help to Buy loan.

Therefore, with the growth in the availability and diversity of second charge mortgages, here are four frequent opportunities where a second charge mortgage might just prove to be the most suitable solution for a client.

Low legacy rate or interest-only

There are many borrowers on a lifetime tracker or variable rate that is so low that 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 the money, rather than shift the entire balance onto a more expensive rate.

We also encounter clients on an existing interest only mortgage who, if they were to re-mortgage, would need to shift to capital repayment. A second charge mortgage can enable borrowers in this situation to borrow money on their home and keep their existing interest-only mortgage in place.

A second charge loan can solve many problems

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For customers who have unconventional modes of income or employment, or those who are locked into fixed-rate mortgages. Also you may have a prohibitive Early-Repayment Charge or wish to borrow at a higher loan-to-value ratio or protect an existing mortgage rate. These are just a few of the scenarios in which re-mortgaging options can often be unsuitable.

Second charge lending plays a vital role in the structure of personal financing and has a very important part to play in the future. This form of funding offers speed and flexibility which high street lenders simply cannot compete with.

Borrowers over the last 2 years have grown in confidence and are using second charge finance for many different uses. The costs of this form of lending have reduced significantly over the past few years, therefore making second charges far more competitive and practical than in the past.

The second charge sector has changed dramatically for the better over the past 5 years as lenders have seen the gap in the market for this type of loan. No longer is a second charge seen as a last option and is now a serious player in the short and long-term lending market.

The industry’s huge growth over the last few years proves homeowners have become aware of the ways this form of loan can help their plans progress. This type of loan is quick to complete, a straightforward case can be finalised in just a matter of days rather than weeks which always help’s the borrower.

Like to know more?

When taking out a new loan you should seek independent professional advice, we have a team of experts waiting to take your enquiry so please do make contact. 

Second charge lending on an upward spiral

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Second charge lending is fast becoming a sound and solid way for homeowners to put their finances back in order. The majority of people are becoming very wary of the so called “pay day” lenders. Second charge lending has always been in the marketplace but over the last 5 years this form of funding has grown significantly.

A second charge loan is quite simple, it utilises the equity in a property to make cash available at very good interest rates.

What is equity?

This is easy to work out, just take the current value of your home and deduct the outstanding mortgage you may have and what is left is known as equity.

Example:

Property Value £250,000 Outstanding mortgage £150,000 Equity = £100,000

Second charge lending has made huge strides in the last 5 years and now should be considered before any decision is made about re-financing your property. Second charge lending offers a fast and effective way to raise capital at a very affordable cost. Interest rates and set up costs offered by lenders have reduced significantly over the last couple of years and now are in line with the mortgage market.

The range of second charge loans are increasing every day with more flexible repayment methods being offered which has found favour with the borrower. Repayment periods are flexible and are generally set to suit the client’s wishes.

Like to know more?

If you are considering taking out a loan please do make contact and one of our fully qualified advisers will be happy to help.

Re-mortgage or a second charge?

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Why would one opt to take the second charge route rather than re-mortgage?

Lots of reasons actually. For example, many customers have a really good first mortgage deal, maybe a great fixed or tracker rate that they don’t want to give up. Taking a second charge at a higher rate may mean that the blended rate across the whole debt is still lower than a new first deal, so a second charge loan can make good financial sense.

Some borrowers may face a stiff early repayment charge on their first mortgage if they re-mortgage. Others may have had a change in their circumstances which means switching to a bigger first charge mortgage is not an option. Perhaps they started a family or changed jobs resulting in a different source of income. Let’s not forget, second charges can be considerably quicker to complete than re-mortgages, especially with the expanded use of Automated Valuation Models.

Confusing

Raising funds or borrowing money at any time in life especially nowadays can be very daunting and expensive if you get it wrong. There will be various reason you need to raise cash and many options open to the majority.

First piece of advice to heed is to get professional advice as the wrong loan over a period of time could cost thousands more than you need to pay.

Generally, a second charge or secured loan will be cheaper than one unsecured but again do seek advice as this is not always the case. Using a reputable broker will help eliminate a lot of the questions as they are experienced with all types of lending.

Way forward

Second charge loans do not suit every need and it is 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.