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Self-employed – Raising capital

It has always been more difficult for self-employed people to get a mortgage compared to salaried employees. For that matter, second charge loans have historically been somewhat harder to obtain for the self-employed as well.

At the heart of the issue is a tendency among self-employed individuals to not be able to satisfy loan officers looking to placate their own fears that the borrower will not be able to make good on his or her loan. The good news is that things are changing – at least where second charge loans are concerned.

A recently conducted survey among self-employed borrowers to gauge their view on second charge lending shows the following. 80% of respondents confirmed that second charge loans are now competitive enough to make them worthwhile; 20% disagreed.

The survey tells us something important. It tells us that consumer perceptions of second charge loans are improving among self-employed people. That’s no accident. If perceptions are improving, it’s because people looking to borrow are getting better products, better rates, and better service. It is an indication that the second charge market is responding positively to the needs of the self-employed.

Changing the way business is conducted

Lenders are changing the way they do business in order to better serve self-employed applicants. For example, one specialist lender indicated that it had reduced its tax calculation requirements while others are changing their income criteria to make it easier for borrowers to document their income.

Second charge lenders can do a lot more to help the self-employed than primary mortgage lenders because they have more flexibility. They are finally taking advantage of that flexibility to find ways to better serve self-employed borrowers. Even more encouraging is the fact that lenders are coming up with specialised products to account for the wide variety of self-employed workers and their circumstances.

Choosing a loan

This is no easy task as there are so many different options open to the majority of applicants. Be sure you know how much you feel comfortable in repaying each month and seek professional independent advice as to the best loan to suit your needs. We have fully qualified advisers waiting who can assist you so please do get in contact.

 

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Is expensive debt holding you back?

The early part of 2019 saw a sharp rise in the number of mortgage advisers utilising second charge loans for clients concerned about their expensive long-term debt.

According to figures from the Bank of England, personal debt in the UK grew 12.4% in the year to 30 November 2018 the highest level since December 2008.

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.

If borrowers 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 more low rate second charge products on the market than ever before, many at highly attractive rates, so there are real opportunities now for homeowners to consolidate any expensive debt.

Secured loans should be considered as a viable debt solution offering products that are affordable and sustainable.

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.

Can we help?

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

Second charge lending rates reducing

 Lenders have seen the potential growth in the second charge lending market and have responded well by offering very competitive short and long-term packages to suit the majority of needs.

Over the last 12 months second charge interest rates have tumbled and are now very much in-line with a standard mortgage. With the Bank of England holding interest rates again it is expected the already low rates for second charge lending will fall again.

Second charge lending is growing in stature all the time and is now a very serious alterative to the once traditional re-mortgage. In the past a second charge loan was seen as a very expensive alternative to more traditional methods of raising capital.

Another major advantage of second charge lending is the speed of completion. A standard re-mortgage can take months to complete were as a second charge loan can be completed in 15 working days. This of course does depend on the complexity of the case submitted.

This form of loan will not suit everybody but it is without doubt worth exploring with the help of a qualified independent adviser. These days the choices of loans open to the majority of homeowners are vast and it is vital to get the correct one to suit your needs. Making the wrong choice could prove to be very expensive over the longer term so do seek the appropriate professional advice.

Choosing a loan

This is no easy task as there are so many different options open to the majority of applicants. Be sure you know how much you feel comfortable in repaying each month and seek professional independent advice as to the best loan to suit your needs. We have fully qualified advisers waiting who can assist you so please do get in contact.

 

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Average loan size increases

According to figures from the Finance and Leasing Association (FLA), the average second charge loan size has increased from around £25k ten years ago to around £45k now.

The loan-to-value of around 60-65% on a second charge loan hasn’t changed much over the last ten years though, so it is higher property values which have enabled the loan size increase.

Average repayment terms requested at the outset are around 15 years, although the majority redeem within about four to five; and two thirds request a fixed rate product giving them surety of their repayments for the fixed period – important when Base Rate is expected to rise further in that period. Even with a fixed rate, having no early repayment charges means the borrower can refinance whenever circumstances suit, without penalty.

Re-mortgage or a second charge?

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.

Way forward

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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Why a second charge loan?

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

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)

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

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

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.

Second charge lending has soared in the last year

Second charge lending has soared in the last year, with the number of people taking out these specialist mortgages increasing by nearly a quarter.

The value of new business in this area of the mortgage market went up by 23% to £108 million in May 2019, according to new figures from the Finance & Leasing Association (FLA). Meanwhile, the number of new agreements increased by 22%.

The second charge mortgage market remained buoyant in May, as monthly new business reached more than £100 million for the second time this year.”

What are second charge mortgages?

A second charge loan is, quite literally, a second mortgage. It is a loan which is secured against your home in the same way as a standard mortgage. Homeowners can take a second mortgage out with another lender, so can shop around to find the best deal.

The loan can be used a bit like a re-mortgage or personal loan to raise additional money for things like home improvements.

Commonly they are used by people who are already on a good rate and don’t want to re-mortgage away from this to raise money.

Others use it to avoid paying early repayment charges associated with re-mortgaging or because they have experienced credit problems and may therefore find switching to a new deal tricky.

May’s increase in second charge lending marks the ninth consecutive month of new business growth.

Back in April the FLA reported a 24% rise in new second mortgages.

Need help?

If you are considering taking out a new loan against your property please get in touch with one of our fully qualified advisers who will be happy to guide you.