Years gone by second charge mortgages may have been overlooked or consciously excluded from the options considered by mortgage intermediaries for clients looking to capital raise.
The alignment of regulation has led an increasing number of mortgage advisers to explore more deeply the options available to their clients, and with good reason.
In a sustained low interest rate environment, there has never been wider availability of low-cost borrowing options for those seeking to re-mortgage.
However, there are groups of borrowers who may need to raise finance but would be financially disadvantaged from the prospect of re-mortgaging away from their current deal.
Interest-only existing mortgage focus
Interest-only mortgage borrowers often find themselves between a rock and a hard place when it comes to further borrowing especially if they want to retain their existing terms. If they re-mortgage, there is a strong possibility they will have to sacrifice their interest-only mortgage. Many borrowers these days can get a nasty shock when they attempt to apply for a further advance from many mainstream mortgage lenders. A practice widely applied by mortgage lenders either requires the borrower to provide proof of their exit strategy for repaying the interest-only loan, or a conversion of their existing mortgage borrowing as well as the new loan amount onto a capital and interest basis. This situation in many cases makes raising capital a non-starter, leaving the client frustrated. This is where a second charge can be a vital alternative.
Second charge to the rescue
A second charge loan would enable them to retain the bulk of their borrowing on an interest only basis and on their existing terms, whilst taking out the additional mortgage on a repayment basis. With over 3.3 million interest-only mortgages in the UK, a second charge could potentially be of enormous benefit to this group of borrowers.
Can we help?
If you are looking to raise capital against the value of your property please do contact us and one of our independent advisers will be happy to assist.