As a homeowner are you looking to raise capital for a project this year?

Many homeowners these days are looking for ways to raise capital, which is safe, quick, and cost effective. Over recent years property values have increased year on year and the majority of homeowners will be pleasantly surprised to see just what their property is now worth.

In the majority of cases it is more cost effective to raise a loan using the house as security even if you have a mortgage secured against it already. A personal loan from a bank as an example can be expensive, a second charge loan really does offer a viable alternative.

What is the equity in your property?

Example: if your property is currently valued at £300,000 and your current mortgage is £150,000 you have £150,000 equity. There are many good quality lenders who would be interested in a second charge loan/mortgage on the equity within your home. The plus side of all this is the costs are affordable and can be set to your budget.

Advantages of a second charge mortgage

A)        Your credit history may well not be so good now and you want to borrow to extend your current property, this could be the cheapest solution.

B)        You may be self-employed and having problems raising finance, this route could be the perfect solution by utilising your property.

C)        Repayment terms and periods are very much to your requirements, so they can be tailored to suit your budget.   

Need some assistance?

If you think this type of loan could assist you in your future planning it is especially important to ensure you get the right one to suit your long-term needs. There are many different lenders offering numerous second charge loans, please do call our fully qualified independent advisers who will be happy to help you achieve the correct plan for you.

Second charges on the up again

Second charge lending totalled a new post-credit crunch record of £138.4m in February, posting a year-on-year increase of 83%.

The figures from second charge lenders, showed a strong start in 2022 as January had a lending total of £111.4m.

The number of loans written was all but identical between December 2021 and January 2022 at 2,500 and 2,494 respectively.

The average loan size jumped from £44,673.90 in January to £46,522 in February.

Meanwhile, the average loan term increased significantly between January and February 2022 from 15 to 21.5 years.

This could be a result of the increased cost of living and a sign consumers are trying to bring payments down to their lowest level due to fears of what is coming next.

Second charge lending – seek professional advice.

When borrowing money whatever the most suitable solution may be, the ability to source second charge products for comparison against first charges means you will get the best deal to suit your needs. The key being that all options have been explored, not ignored.

It pays to get professional advice when seeking a loan that will be secured on your property as a bad move now could cost you thousands in the future. 

It all comes back to the fact that, if you don’t ask, you don’t get. By not asking the question, you are left in a rather precarious position. An independent professional adviser will have all options open to you and can advise you as to the best solution for your requirements.

Second charge lenders are also indicating they are keen to innovate further and bring products even closer in line to those offered by first charge players. If you add to that a greater degree of flexibility on affordability, you suddenly open up options that previously did not exist via the conventional re-mortgage.

The broker

These days due to the vast choices open to the prospective borrower it is vital they get a professional adviser to point them in the right direction. With so many loans and re-mortgages available anybody contemplating taking out loan would be very well advised to seek independent broker advice.

Can we assist?

If you would like to discuss your future and present borrowing needs, please do make contact and one of our independent qualified advisers will be pleased to help. 

Secured lending (second charge) is more competitive than ever before

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.

Homeowners 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.

Can we assist

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

What’s the difference between a secured loan and unsecured one?

Confused about your next loan, you’re not alone I assure you?

An unsecured loan is a loan made to a party without any particular asset offered as collateral/security. A secured loan on the other hand is secured on your property, which has very different implications.

Unsecured loans are usually for small amounts but can be up to £25,000. The loans are generally repayable over a term of between 1 to 5 years – normally on fixed interest rates.

If you have an unsecured loan, this means that if you become unable to repay under the terms of the loan, whilst you will still remain liable under the terms of the agreement, the lender does not have the immediate right to take possession of your assets. They can however apply for a Bailiff’s order to come and take goods to the value of the outstanding loan via the courts.

If you take a Secured loan, this is in effect a 2nd mortgage or 2nd charge.

The sum lent can usually be much greater, dependent on the financial circumstances of the borrower and the amount of equity available in the house it is secured against. Secured loans are generally available from as little as £3,000 and interest rates are generally much more competitive than unsecured loans.

Secured loans may be for a period of up to 30 years or more and because there is some security offered by the borrower, the risk to the lender is much less. Interest rates are therefore, usually, much less, although interest rates might be variable and dependent on external factors.

The mortgage lender generally has the right to take possession of the property if the loan goes unpaid or if the terms of the agreement are not met they have the right to sell it. This is usually referred to as being in ‘default’ or ‘forfeiture’. This added ‘security’ reduces the risk to the lender and it is therefore usual for a secured loan to be cheaper with interest payments being lower to reflect the lesser risk.

If you have a weak credit history you are more likely to obtain a secured loan than an unsecured loan.

Need some advice?

If you are looking to take out a new loan please do make contact and one of our fully qualified independent advisers will be happy to help.

A better choice of lending?

More people than ever before are turning to a second charge mortgage to raise funds rather than taking out a personal loan or re-mortgaging.

What is a second charge mortgage?

Second charge mortgages are becoming increasingly popular, with the number of people opting for one at its highest level since 2008. They allow you to borrow a lump sum secured against your property which you repay alongside your existing mortgage over a fixed term.

Many people use them to raise money as an alternative to a re-mortgage.

How do you qualify?

To qualify for a second charge mortgage you must be a homeowner, although you don’t necessarily have to be living there. While a first charge mortgage is based on a number of factors, including your deposit, credit score and ability to pay each month, a second charge mortgage is based on the equity available in your property.

Equity?

This is the percentage of your home owned outright by you. You can work this out by calculating the amount you owe on your property against the value of it. So, if your property is worth £300,000 and you still have to pay off £200,000 on your mortgage, you have £100,000 in equity.

You don’t need to have a high credit rating; in fact you might even be able to get one with a low score. This is because lenders look more favourably on borrowers with a poor credit rating if they are prepared to borrow against their home. The typical minimum term is three years, and the maximum is 30 years, plus they can be paid off alongside your existing mortgage. You can borrow from £1,000 (varies from lender to lender) upwards and the greater the equity in your property, the more you will be able to secure.

Like to know more?

If you would like to know more please do make contact and one of our independent qualified advisers will be happy to help.

Re-mortgage or a second charge do you know the difference?


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

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.

Do you find all this really 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.

The best 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.

Second charge interest rates are holding firm at present

For the time being second charge interest rates are likely to remain at their all-time lows. If you are considering a new loan now could be the time to make your move, there is a feeling amongst the experts this trend could soon be reversed.

Second charge loan interest rates have been tumbling for months now. A second charge loan could be used as an alternative to a re-mortgage if it fits your lending criteria.

Second charge lending is now a serious alterative to the once traditional re-mortgage.

One thing you should do if you are contemplating taking out a new loan is to consult an experienced professional independent adviser as this form on loan will not suit everybody.

Lenders have seen the potential growth in this area of raising funds and have responded well by offering competitive short and long-term packages to suit the majority of requirements. More and more innovative products are coming onto the market all the time which has to be good news for the consumer.

Remember this is a secured form of lending and therefore will in most cases be far cheaper than an unsecured loan.

These days the choices of loans open to homeowners is vast and it is vital to get the correct one to suit your needs. Making the wrong choice could prove to be expensive over the longer term so do seek independent professional advice.

Need some assistance?

If you think this form of loan could assist you in your future planning, please call one of our independent advisers who will be able to guide you in the correct direction.

Second charge lending in November last year came to £137.8m

This is an increase of 11.5% on October’s figure and is the second post-credit crunch record breaking month in a row.

In fact, it’s accurate to say that second charge lending is witnessing its highest period of lending (Q4) since 2008.

In November, over 3,000 loans were written for the first time since 2008, making for a year-on-year increase of 1,000 loans – itself another record.

And second charge lending hit £1.06bn on an annual basis, the first time it has passed the £1bn watermark since 2019.

The only sore spot is completion time slowing by an average of 5.2 days over the month, coming to an average completion time of 22.6 days. It’s widely considered that lenders’ service levels are being met and the increase is more reflective of delays caused by the Land Registry backlog.

Re-mortgage v Second charge


So, 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 totally. 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.

Like to know more?

If you would like to know more about second charge loans please do make contact and one of our advisers will be happy to assist.

Second charge lending is becoming more popular than ever before

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, second charge loans will deliver

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.

1}         Good fast communication.

2}         Online contact details.

3}         Return applications rapidly.

4}         Easy access to the property for the survey.

5}         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.

Landlords – The place to be for stability

The Buy to Let City Tracker provides landlords with an insight into the UK’s best investment hotspots by analysing five key indicators which impact the desirability of locations.

Analysis takes in the average total rent, the best short-term returns through yield as well as the long-term return through house price growth over the past decade.

Aldermore also looks at the lowest number of vacancies as a proportion of total average total of total housing stock and the percentage of the city population in the rental market.

The city which emerged as the number one city, considering all these factors, was Bristol which has risen to the top spot because of the long-term growth of property values in the area along with the lowest number of long-term property vacancies out of all the 50 locations analysed.

Indeed, only 0.6% of rental properties were vacant in the city.

Bristol knocked Manchester off the top spot and down to position four on the table whilst Oxford and Cambridge took second and third places respectively.

London, which ranked third last year, has moved to sixth place on the list but, according to Aldermore, continued to be an attractive investment due to the long-term outlook for property prices, market potential, and relatively high proportion of private renters.

A new entrant to the top ten was Luton, which has risen from 12th to fifth place in the rankings because of the relative improvement of long-term house prices.

It recorded 5.2% year-on-year house price growth over the last decade, and now has the strongest property price growth of any of the 50 cities, Aldermore said.

The City Tracker shows the UK housing market is rich with diverse and unique conditions across the regions that are ripe for investment opportunities.

As we move towards a post-Covid environment, we hope this analysis gives food for thought to many landlords on where to look for those hidden gems and returns that meet their business strategies.

Private landlords are a central part of the housing market, supporting over 4.5 million households in the UK and, as we emerge from the pandemic, landlords will need to meet the emerging demand for choice and variety from renters.

With the economy opening up and EPC rating changes coming in 2025, now is a great time for landlords to talk with their broker to review where they want to take their portfolios in the future.