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