Second charges are becoming more popular by the day, the good thing is the homeowner is becoming aware of their availability. One thing to be certain of, if you are considering raising funds using your property as security you will be getting a much better interest rate than a non-secured loan.
Could I get a second charge loan?
Lenders now have to comply with stricter UK and EU rules, governing:
- Mortgage advice
- Affordable lending
- Dealing with payment difficulties.
This means that lenders now have to make the same affordability checks, and “stress test” the borrower’s financial circumstances as an applicant for a main or first charge residential mortgage would have to.
Borrowers will now have to provide evidence that the borrower can afford to pay back any loan.
Why a second charge mortgage?
- If you’re struggling to get some form of unsecured borrowing, such as a personal loan, perhaps because you’re self-employed
- If your credit rating has gone down since taking out your first mortgage, re-mortgaging could mean you end up paying more interest on your entire mortgage. A second mortgage means extra interest just on the new amount you want to borrow
- If your mortgage has a high early repayment charge, it might be cheaper for you to take out a second charge mortgage rather than to re-mortgage.
Some things to consider before taking out a second mortgage
- Before you take out a second charge mortgage, it’s a good idea to get advice from a suitably qualified advisor.
- They will have to follow the rules as set out by the FCA when dealing with you. These rules are designed to protect you.
- If you choose not to get formal advice, you run the risk of taking a loan that isn’t suitable for you.
If you would like to know more please do make contact and one of our fully qualified advisers will be happy to assist.