5 minute read on why a second charge could be a solution

We are currently taking enquiries from brokers and placing cases for the following:

Customers on lifetime trackers or other products with very low rates, not deals that need disturbing!

A second charge can help by raising the additional funds required, perhaps even with a different term to the main. The main mortgage remains untouched on its very competitive rate.  If or when that mortgage comes up for a review, you can consider consolidating the second charge.

Customers that have accumulated adverse credit since last reviewing or taking out their main mortgage.

Second Charges are more flexible around adverse credit, with some lenders ignoring items once they 12 months old.  A customer could secure the lending needed now, carry out their plans and once the adverse credit is older, you can put them back to a remortgage to clear the secured loan.  A temporary solution to a current need.

Customers wanting to debt consolidate.

Second Charge lenders offer more when it comes to consolidating debts, with less restrictions on maximum LTV, loan amounts and loan or debt to income ratios, also no requirement to treat some of the debt as continuing within affordability calculations, when its being consolidated.

Customers that need that bit more on affordability calculations.

We have lenders that will consider up to 6 times income or income and expenditure based affordability lending, if there is proven and sufficient surplus to afford the secured loan it could be approved.

Customers that have bonuses, commission and overtime

We have second charge lenders that will take 100% of bonuses, commission and overtime.

Self employed customers with 1 years accounts

Your customer may have recently started a new business or changed from employed to self-employed.  We have lenders that will consider this, as long as there is at least 1 years accounts.  Whilst some first charge lenders will also consider this, the LTVs and terms can often be restrictive.

Customers need a higher LTV.

A customers lending requirements may take them above a traditional 90% LTV for a remortgage, second charges can go to 100% with some offering 140% with a smaller loan size.

Where a first charge lender will not lend due to the loan purpose

Second charge lenders will lend for any legal purpose, this includes tax bills and repaying business loans.

See more criteria here

Whatever the query, just get in touch and we’ll discuss all available solutions for each of your customers based on their circumstances.

Call on 0800 316 2224

Clever Lending announces a triple appointment

Specialist master broker, Clever Lending, has freshened up its offering with investment into a major growth plan, this comprises of a new CEO, a Commercial and Bridging Specialist and a Business Development Manager. 

Anesh Dayaram – Chief Executive Officer

Clever Lending has named its former Finance Director, Anesh Dayaram, as its new Chief Executive Officer to lead the company in its mission to support introducers with their specialist lending needs all in one place and drive an aggressive growth strategy. Anesh has been working closely with Director of New Business & Operations, Michelle Neville, Director of Technical Operations, Kevin Blount and Director of Business Development, Paul Day to transition to this role and drive the business forward.

Anesh said of his appointment and the future of Clever Lending: “I am excited to step up into this new position and further develop the business in support of our existing and prospective introducers so they can offer more solutions to their customers.”

Paul Adams – Commercial and Bridging Specialist

Paul Adams has joined Clever Lending as a Commercial and Bridging Specialist, having a wealth of experience in all types of bridging, development and commercial finance, including large buy to let portfolios, bespoke Private Bank funding & more complex lending solutions for Foreign Nationals & offshore SPVs.

Paul said “I’m delighted to be joining Clever Lending at this exciting time of growth and look forward to working closely with the team to further enhance their commercial lending proposition and be part of their continued success moving forward.”

Sam Nasim – Business Development Manager

Sam Nasim joins Clever lending as a Business Development Manager, with a wealth of experience in the specialist lending sector, having worked for several lenders within this space. He has illustrated in his career that he can make things happen when helping brokers and by his own admission loves the intermediated mortgage market, especially as he’s previously worked as a mortgage adviser.

Sam said “I’m really excited to be joining Clever Lending at a time when the market is so buoyant, the world seems to be going back to normality and specialist lending opportunities are becoming more and more prevalent. I couldn’t be happier to be joining Clever Lending at this time of growth and to help our broker partners rise to new heights.

Clever Lending’s solutions include:

  • Second Charge Mortgages
  • Commercial Mortgages
  • Development Finance
  • Bridging Loans
  • Buy-to-let

The firm has years of experience in helping introducers support their customers with solutions to match their needs, dealing with the most complex of requirements.

Introducers looking to support their customers can approach Clever Lending, who will offer an advised or a packaged solution, multiple lending options, a personal service from a passionate team and a competitive commission structure.

Find out more about Clever Lending or speak to a member of the team on 0800 316 2224

Bridging saves delayed property purchases in first quarter

Funding a chain break once again the most popular reason for obtaining bridging finance, according to the latest Bridging Trends data.

Key data points from Bridging Trends Q1 2021:

  • Bridging loan market stabilised
  • Chain-break most popular use
  • Average LTV climbs to 55%

For the second consecutive quarter, the most popular use of a bridging loan was to fund a chain-break, contributing to 20% of all loans in Q1 2021, down from 23% during Q4 2020.

Purchasing an investment property was the second most popular use for bridging finance in Q1, falling to 19% of all lending, from 21% in the previous quarter.

The data highlights how bridging finance continues to be an increasingly attractive proposition to buyers who are looking to save their delayed property purchases.

Whilst demand for bridging loans for business purposes increased from 10% to 14% in the first quarter of the year, as businesses quickly readied themselves for lock-down restrictions easing.

Elsewhere, figures confirm the UK bridging loan market stabilised in the first quarter of the year, as Covid-19 lockdown restrictions continued.

Total contributor lending increased to £144.51 million, a 5% rise on the previous quarter (£137.22m), largely attributed to new contributors joining Bridging Trends: LDN finance and Optimum Commercial Finance.

Regulated bridging loans transacted by contributors remained unchanged from the previous quarter, at 48% of total lending. Meanwhile, second charge transactions remained at 22% of market share in Q1 2021.

The average weighted monthly interest rate in Q1 2021 was 0.74%. This was marginally higher (0.02%) than in Q4 2020, and still considerably cheaper than rates offered before the Covid-19 outbreak (0.80%).

The greatest shifts in Q1 2021 were the average loan-to-value (LTV), rising to 55.2%, from 51.3% in the previous quarter. This could be attributed to the increase in availability of higher LTV products over recent months, in response to borrower demand.

The average term of a bridging loan climbed by one month to 12 months, falling in line with the same quarter in 2020. Whilst the average completion time on a bridging loan application increased to 53 days in the first quarter of the year, up from 50 days in Q4 2020. This is the highest figure recorded since Bridging Trends launched in 2015.

The top criteria search made by bridging finance brokers during Q1 was ‘maximum LTV,’ according to data supplied by Knowledge Bank. Followed by ‘regulated bridging’ and ‘minimum loan amount.’ This further indicates the growing demand for higher LTV products on new home purchases.

Home Improvements the new norm?

In a recent trends report carried out by Rated People it shows the level of customer desire for home improvements and therefore the required need to raise capital for their planned works.

Home improvements tops many peoples wish list for 2021 and this just happens to coincide with £250bn of mortgage product maturities, which is up almost 50% on 2020.

Whilst many of these clients will be reviewing their current mortgage situation, they may also be considering additional borrowing to fund home improvements, perhaps to accommodate a change in lifestyle.  If not already doing so, we would urge you to contact your existing customers and discuss their requirements.

The reports also shows us that the pandemic has changed UK home priorities when it comes to what they want from their homes. They state that many of the UK populous want to add space to their current homes.

  • 55% of the UK worked from home in 2020 but many did not have the home space they needed
  • 38% of respondents said they wanted to improve or create home offices in 2021.
  • 43% of the UK plan to work more from home even when COVID-19 restrictions are lifted

Is there any wonder, when the survey showed, of those working from home:

  • 41% don’t have a proper desk
  • 39% don’t have an office chair
  • 29% have to clear toys off their “desk” each day
  • 24% are embarrassed by the background
  • 22% work sitting on the floor

Rated people state that ‘home office’, as part of home improvements, massively increased in the run up to 2021. By 139% for those wanting a garden room and 104% increase for additional rooms within the home and 51% increase in those wishing to have a studio construction. They go on further to predict that home office improvements will be one of the biggest trends of 2021.

Furthermore, outdoor space has become all the more important following the pandemic with 64% of UK residents say they wouldn’t even buy a house without a garden now, where those that already do have gardens 47% have stated that they will be making improvements in the coming year.

Whilst you are talking to your customers about new mortgage rates, you may find they have additional borrowing needs.  In the main these requirements can be satisfied by a further advance or a new mortgage with an alternative lender.  But what happens when these options aren’t available or accepted by a lender? Especially if the pandemic led to a change in circumstances.

A second charge mortgage could be the answer.

  • Rates from 3.37%
  • 100% LTV available (140% for small loan sizes)
  • Lenders will also consider 100% of regular bonus, commission and overtime
  • Impaired credit, CCJ’s, defaults, IVA and DMP’s
  • Previously furlough workers who are back working
  • Mortgage payment holidays with proof of returned full payments
  • Secure on Buy to Let

Furthermore, you might be talking to customers who are have early repayment charges, tied into he current mortgage or unable to move the mortgage due to it being restricted by interest only options or increase in payments if moved to a repayment basis.  If further borrowing is needed, a second charge can also help.

Why a second charge mortgage could be the solution:

  • Your client’s current mortgage has a high early repayment charge.
  • Your client may be on a competitive mortgage rate they wish to retain.
  • Your client may have an interest only first charge
  • For affordability reasons e.g. complex income
  • High LTV required
  • Your client has a poor credit profile

A second charge can be used to fund any legal transaction, which might be:

  • Home improvements
  • Debt consolidation
  • Investment for another property purchase
  • Business purposes
  • Gifting deposit
  • Tax bills
  • Weddings

To move or improve?

One of the side-effects of lockdown is that many people are re-evaluating the amount of space they need in their house and garden or if they need to move to be closer to family.

Many people are simply taking advantage of the current stamp duty holiday and low interest rates. However, if your customer wants to stay put for family, friends, work or schools, they may just want to improve their current home.

Customers might be looking for:

  • Loft conversions
  • Single or double extensions
  • Garage to room conversions
  • Reconfiguration of the existing layout for more space
  • Outdoor cabin as a playroom, home office or a place to relax

In the main the traditional route will be a further advance with the current lender or a new mortgage with an alternative lender.  But what happens when these options aren’t available or accepted by a lender? Especially if the pandemic led to a change in circumstances.

A second charge mortgage could be the answer.

Whilst during the lockdown some second charge lenders tightened their criteria and lowered LTVs, we are now seeing them come back into the market and getting back to somewhat pre COVID offerings.

Just recently, lenders started to offer 100% LTV second charges for both employed and self-employed clients.  Some are even offering 140% LTV for small loan sizes.  Lenders will also consider 100% of regular bonus, commission and overtime.  Those that have been on furlough will be considered once they have a full month’s payslip.

Secured loans are usually easier to get approved compared to a first charge mortgage, especially if your customer has had credit issues in the past, a change of circumstances or complex income.

Also, a relaxation in planning laws under the permitted development rights, may spur homeowners to embark on home extensions.

Why a second charge mortgage could be the solution:

  • Your client’s current mortgage has a high early repayment charge.
  • Your client may be on a competitive mortgage rate they wish to retain.
  • Your client may have an interest only first charge
  • For affordability reasons e.g. complex income
  • High LTV required
  • Your client has a poor credit profile

A second charge can be used to fund any legal transaction, which might be:

  • Home improvements
  • Debt consolidation
  • Investment for another property purchase
  • Business purposes
  • Gifting deposit
  • Tax bills
  • Weddings

Unravel your customers’ finances!

The customer story

We were approached by a broker as her customer was struggling to manage the numerous payments for his existing debts. The customer already had first and second charge mortgages, along with several unsecured debts, and his monthly commitments were becoming difficult to meet.

His credit score wasn’t great as he’d missed payments on both his mortgages and unsecured debts, the most recent being on his second charge, which he’d missed but still paid during the same month. The customer was employed by his family business and had become a 20% shareholder two years ago.

Applying our insight

As a portion of the customer’s main income was from the dividend from the family business, we needed a lender who would class him as self-employed. Otherwise we wouldn’t have been able to take this income into account and the amount of money he required would have been deemed unaffordable.

The recommended lender was happy to review the case and accept an accountant’s certificate showing one year’s financials as proof of the customer’s self-employment income. Also, as the 2nd charge payment was late but made up within the same calendar month, the new lender didn’t class it as missed.

An ideal solution

The lender was prepared to offer a new second charge mortgage of £62,500 over 25 years with a fixed rate for the first three years.

This allowed him to consolidate his debts of more that £22,000 and pay off his existing secured loan of nearly £40,000. It also meant he only had to make one payment of £600 a month – which was half of the amount he was paying before.

What we said

“This client’s circumstances were unusual in terms of deciding how best to help him secure a suitable product. His bad credit and employment status ruled out many lenders – however, our experience and product knowledge meant we knew there could be a solution for him.

“We were happy to help this customer who was able to get back on track with his finances, whilst saving money every month, which would allow him to pay back his debts as part of an affordable plan.”

You can submit a case here or call us on 0800 316 2224 to discuss any case requirements or simply email enquiries@cleverlending.co.uk.

Property auction finance, big opportunities for brokers

As landlords and developers are increasingly using limited companies to acquire buy-to-let investments, clients buying at a property auction offer the potential for brokers to increase the number of bridging finance cases they can complete.

The trend of buying property at an auction house is mirroring that within the wider landlord sector and should be a target market for brokers with clients investing in property.

Not all buyers are aware of the broker route to help source the finance they need to make a purchase at a property auction, but there is clearly a gap in the market for brokers to ensure clients are receiving good advice.

This is particularly so given the time pressures involved and need for reliable lending. Most auctions require completion within 28 days, or for some it can be as little as 14 days, so brokers can also help a buyer to put the necessary funding in place before the auction too.

If buyers are unable to complete the purchase there can be steep penalties, legal action and the risk of compensating out-of-pocket sellers. This is why it’s vital for buyers to get the right lender that can complete the finance to deadline on almost any type of property.

Property auction finance

Brokers can capitalise on property auction finance

We’ve noticed an increasing number of professional buyers are choosing to buy properties at auction, rather than the traditional sales route, which has presented a real opportunity brokers should not shy away from.

The property auction market was previously seen as one which was unpredictable and only sold repossession or problem properties. Now, it’s an environment that provides a quick, easy and fair way of securing or selling a wide range of investment assets, such as HMOs, retail units, semi-commercial properties and purpose-built rental flats.

There are numerous lenders operating in this space and many products available on the auction market, and as with standard residential mortgages, brokers should be encouraged to seek assistance in sourcing the most suitable finance option for each customer and property profile they are looking to source funds for.

With more landlords buying under a limited company, they are also more likely to be repeat purchasers with long-term investment strategies, and brokers can benefit from ongoing relationships and more regular funding requirements.

Brokers are well-placed to discuss the benefits and possible pitfalls of buying at property auctions with clients. By working closely with buyers, sellers and developers who are active in the market, this could lead to an increase in their income across the residential, commercial and buy-to-let markets.

Not only that, but brokers are able to earn commission once a bridging has been put in place, and again if the property is refinanced to a longer-term mortgage. Although the process is slightly different from a traditional sale, brokers don’t need to be an expert in the field. All they need to do is speak to a specialist distributer, such as Clever Lending, who can assist with the application and deal with the customer on their behalf if required.