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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.

The great British DIY season is with us

Almost half of homeowners (49%) are planning a home improvement project before Christmas, according to recent research. Each homeowner on average will spend £4,339 from their savings pot to pay for it.

Almost a quarter of people making home improvements are planning to draw on their savings (22%) with the remainder borrowing to fund the work.

A total in excess of £30bn is set to be spent on DIY projects in the next few months alone.

Most popular

Decorating is the most favoured DIY job, with 41% of homeowners planning to get the paint brushes out before December arrives.

A savvy 18% of respondents are taking advantage of gardeners being quiet and commissioning landscaping projects to get their garden in shape for 2020.

And for 12% of respondents, upgrading the kitchen is the top priority, even if it adds to the domestic chaos during the summer months.

Fund raising

Using a second charge loan is likely to offer better rates of interest as the loan is secured on your property. Unsecured loans from high street banks and other sources can be notoriously expensive, we have all seen the rates charged by the so called “pay day” lenders.

The reason for a secured loan being more cost effective is due to the lender having to assess the risk. If you are a high-risk borrower they will need to offset the risk with higher interest rates. So, if you offer security, then the risk involved is much lower and the lender will offer far better rates.

This is indeed particularly useful for those special groups such as the self-employed, retired or those who have had past credit problems.

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

Need some assistance?

If you think this type of loan could assist you in your future planning it is very important to ensure you get the right one to suit you. There are many different lenders offering numerous second charge loans so please do call one of our advisers.

Second charge market remains very busy

The second charge market continued its strong start to the year with its highest level of activity in more than 10 years in March.

According to data from the Finance and Leasing Association (FLA) 2,392 new second charge loans were taken out in March, the most since October 2008.

This was up 31% on March last year and a similar uptick was seen in the value of new business, as that rose 25% to hit £108m for the month.

The data rounds-up a strong first three months of 2019 for the second charge market with January new deals up 18% and the value of business up 12%.

February witnessed even stronger growth, with new agreements rising by 24% and the value of these growing 20% compared to the same month last year.

Strong first quarter

Overall, January to March saw 6,500 deals completed worth £292m, up 25% and 19% respectively on the same period in 2018.

The trend also shows through in the annual figures with 24,812 agreements, up 13%, worth £1.116bn, up 9%, completed in the 12 months to March.

Who can benefit’s from a second charge loan behind the main mortgage?

  • You are in a tie-in period and do not want to pay a large penalty
  • You need funds very quickly
  • You have an interest only mortgage and do not wish to re-mortgage to capital & repayment

Why you might apply for a second charge loan?

  • You wish to consolidate your outstanding loans and credit cards
  • You wish to carry out home improvements
  • You are looking to inject cash into your business
  • You have had adverse credit and wish to speak to a company who will understand your situation
  • You are self-employed and wish to raise finance for one of the above

Can we help?

If you would like more information on how this type of loan could help you please do contact one of our advisers.

Economic uncertainty drives second charge market

Increases in the second charge loan market suggests economic uncertainty is causing more people to improve their current property rather than move.

Data shows there has been an 8.9% increase in people applying for second charge finance in the second half of 2018, when compared to the same time in 2017.

Figures also show that 51% of these second charges were applied for to make home improvements.

In addition, reports show a 9.2% increase in re-mortgage applications in January 2019 compared to the same period last year. This is reinforced by the ONS reporting in their December House Price Index that the rate of increase in UK house prices is 2.1%, the lowest UK annual rate since August 2013.

With an increase in re-mortgage applications, slump in the UK housing market and uncertainty around our economy, this could suggest more people are choosing to improve their current properties – rather than take a potential financial risk of moving.

It could be that Brexit worries are flattening the property market, meaning fewer people are moving and more homeowners are making improvements to their current properties rather than move during a time when it is still unclear how Brexit will affect property prices.

If you are looking to raise funds it’s important to consider a second charge as a solution for a refinancing or home improvement.

Like too know more?

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

New era for second charge loans

Customers who have unconventional modes of income or employment, or those who are locked into fixed-rate mortgages with prohibitive Early-Repayment Charges who 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.

Prior to the introduction of the Mortgage Credit Directive (MCD) in December 2016, low levels of product knowledge and concerns about fees were being cited as some of the primary reasons for the low volumes of business.

However, the introduction of the MCD brought the second charge mortgage sector further into line with its first charge cousin (Main Mortgage).

There have also been moves towards new and previously untapped areas of influence within the market, with growing numbers of buy-to-let landlords using second-charge loans to grow their portfolios or to fund improvements on existing properties, combined with a comparable rise in the number of customers using loans to consolidate debt.

Indeed, many people within the industry now believe that the uncertainties of a volatile Brexit and the rise in the number of adverse-credit lending scenarios are driving enquiries upwards.

There has also been a significant uptick in cases involving home improvements where customers have been referred for a second charge mortgage as a cheaper option than re-mortgaging.

As we venture ever further into 2019, we can see an industry that is characterised by greater revenue and business streams, wider opportunities, and regulatory safeguards and increased levels of acceptance among both consumers and advisers. In short, the future for second charge loans looks very bright.

Can we assist?

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