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.