Trapped !

Mortgage prisoner:

Interest-only and older mortgage borrowers have found themselves prisoners of their own mortgage lender. Borrowers in this category are turning to a second charge loan as a solid alternative to re-mortgage as a way of raising cash.

Figures show that there are currently 2.8 million people with an interest only mortgage and the majority of those are over 50 years old.

Unfortunately, many of the interest only borrowers, who only pay the interest each month on their mortgage and no capital reduction, find themselves with a problem. Many banks and building societies are now insisting that any re-mortgage be converted to a repayment mortgage, meaning payment of interest and capital. This presents a problem to the more mature borrower as payments each month would increase significantly.

Some other lenders in the market are now refusing to extend mortgages on an interest only basis without seeing absolute proof of a repayment plan at the end of the term. If this is the case then a second charge loan could be the perfect answer to raising funds on your home.

A second charge loan – or second mortgage as they are known – works in the same way as a mortgage and is secured against your property. As the name suggests it comes second in line behind your existing mortgage deal.

If you need to raise funds without re-mortgaging now is a good time to review your situation as interest rates for second charge lending are at an all-time low. There is a very good selection of plans available from standard rate through to various term fixed deals.

If you would like to know more please call one of our fully qualified advisers who will be happy to assist.



A New Era Dawns

New era of lending:

The second charge loan market has recently been hitting the headlines revealing a 5 year high lending figure which topped 1bn last year.

In years gone by the processes for first and second charge mortgages have been very different and this proved confusing to most people. Borrowers clearly did not fully understand how a second charge loan worked or how to go about finding out.

One of the factors behind this escalating growth of this sector is driven by the looming implementation date of the Mortgage Credit Directive (MCD). In light of the recent lending figures it is clear regulation of the market has resulted in intermediaries considering second charge mortgages more closely. MCD will help align second charges to the mainstream mortgage market and open up more choices for the borrower. As a result the division between first and second charge lending will begin to be non-existent and this can only benefit all involved.

Resurgence of second charges:

Although the directive has been a contributing factor, it is felt within the industry that the commitment from the lenders to engage with the intermediaries will be instrumental in the long term success. As a result of this new found understanding more and more intermediaries have a deeper understanding of second charge lending and the potential benefits it offers clients. It is therefore little surprise that second charge lending has topped the £1bn mark last year and figures show it is likely to be much higher in 2016.

Looking forward:

Second charge loans do not suit every need and it is vitally important any potential client seeks the correct advice from a professional qualified adviser. If you wish to know more please do not hesitate to contact us.