Second charge loans are widely available through specialist lenders, yet this latest research suggests it’s only the minority of people who explore them as an option when looking at ways to raise money.
Awareness has improved over the last 2 years, but borrowers still are unsure as to the benefits.
Of the minority who were aware what a second charge mortgage was, 30% didn’t understand what the difference between this and a re-mortgage was.
Second charge lending is now regulated by the Financial Conduct Authority, as part of its Mortgage Credit Directive. This means they are now more strictly governed with regards to affordable lending, giving consumers more peace of mind. Previously they fell under the FCA’s consumer credit agreement.
Anybody contemplating taking out a new loan would be well advised to seek independent professional advice as making an incorrect choice could be very costly.
For some borrowers, a second charge mortgage will be a better option than a re-mortgage, so it’s surprising that so many consumers are unaware of what they are and how they work.
There can be several reasons that a second charge might be the preferred option. For example, you may not want to extend the term on your current mortgage, or lose a good rate, particularly if your circumstances have changed or you have an interest-only mortgage that might be difficult to replace.
Demand for this kind of loan, particularly when it comes to funding home improvements has increased over the past 2 years. One thing which is very evident is that consumers are becoming very aware of just how much they are paying for any unsecured loans they may have.
For those thinking of raising money by releasing equity in their properties, it’s important to explore both second charge and re-mortgages.
Can we help?
If you would like to know more about raising funds from the equity within your property do make contact, one of our fully qualified independent advisers will be happy to assist.