Why a Second Charge Mortgages

A second charge mortgage is additional borrowing against a property which sits behind a main mortgage. The result is two separate loans secured against the value of a property, but the second loan will not affect the first.

A second charge mortgage can be used for many purposes, some of which are listed below.

Second charge mortgages run from a minimum 3 years to a maximum of 35 years and borrowing limits ranging from £10,000 to £1,000,000.  There are specialist buy to let products as well.

Second Charge Mortgage?

A second charge mortgage has a variety of uses, with lending based on the borrower’s credit profile, income, property, borrowing required and reason for the funds.

You should consider and compare a second charge mortgage when offering advise on a remortgage and vice versa.

Most popular uses for a Second Charge Mortgage:

  • Home improvements (extensions, renovations)
  • Debt consolidation (high interest rate debt to lower rates)
  • Investment for another property purchase
  • Business purposes
  • Gifting deposit to family
  • Paying tax bills
  • Paying for weddings, cars or once in a lifetime holiday

Why a Second Charge Mortgage and not a remortgage?

Remortgaging to a new lender can sometimes be the most cost-effective way of raising capital or releasing equity from a property.

However, many customers have a competitive interest rate on their main mortgage that they wish to retain or have an early repayment charge to leave the existing lender and mortgage product.

Therefore, it’s important to give advice as to the best option for your customers individual circumstances, Clever Lending team can help you with this on 0800 316 2224, option 2, option 1.

Other reasons, your customer, should consider a secured loan over a remortgage are

  • They may have an interest only first charge and a lender would want to move it to a full repayment mortgage which might be unaffordable.
  • For affordability reasons e.g. complex income, multiple income sources
  • Higher loan to value required (loan amount/property value), secured loans allow this to be higher than traditional mortgages
  • A poor credit profile that a traditional mortgage lender won’t accept

Who qualifies for a second charge mortgage?

Much like a first charge mortgage, lending is based on the borrower’s credit profile, income, property, borrowing required and reason for the funds.  Therefore, there are a lot of factors to take into account before you even think about which lender to approach.

Those with a poor credit score or any ‘out of the norm’ circumstances will be considered, and second charge mortgage lenders will consider applications, where a traditional lender wouldn’t.

With lots to take into account, it’s recommended you seek advice on the best option for your customer, Clever Lending can help you with this.

What are the charges on a second charge mortgage?

The usual fees are a valuation fee, legal fees and the lender may charge an application or arrangement fee to cover the costs of setting up the loan.  Early repayment charges can be payable if you repay the loan early.

We offer two options with our fee structure, either added to the loan or paid on application.  Please contact us to discuss further.

What interest is payable?

Second charge mortgage interest rates are higher than those charge on a traditional mortgage as the second charge sits after the first charge.  As it’s therefore classed as a greater risk for the lender the interest rate is higher.  Also, whilst secured loan terms can be up to 35 years, some people look to consolidate them once the first charge mortgage product terms end, say a 5-year fixed rate.

How can I repay a second charge mortgage?

Just as with a first charge repayment mortgage, you will pay monthly payments each month that consists of capital and interest, each payment will reduce the balance owed.

You can pay the secured loan till the end of the full term and the balance is zero or use a lump sum to pay it, from say a house sale or remortgage.

Advised or packaged only

Clever Lending can offer you two options of service, whilst keeping you informed through the process.

  • Advised – Clever Lending will advise your customer, completing the fact find, research, presentation, suitability letter, application and processing to completion. Clever Lending will be responsible for the advice given.
  • Packaged only – Clever Lending will provide you with quotations and KFIs, research the lender and provide the application form and process the case to completion. You will need to give and be responsible for your own advice.

Case Study

Can people take out a second mortgage to consolidate debt and carry out home improvements?

  • We can help people do just that. One customer was able to:
  • Secure a two-year fixed-rate second charge mortgage with no early repayment charges
  • Consolidate £35,000 of debt with various lenders
  • Carry out home improvements
  • Halve his monthly financial commitment

Customer story

This customer approached us as he wanted to consolidate his outstanding debt and raise additional funds to carry out home improvements. His existing repayments for his £35,000 worth of debt with various lenders added up to more than £1,000 every month.

He had been previously declined by a lender for the £67,800 required to settle his debts and carry out the works to his home.

We secured a two-year fixed-rate second charge mortgage with a lender for the full amount required. After consolidating his outstanding debt, the customer’s monthly commitment nearly halved.

Other Criteria and lending options

  • Loans up to £1 million
  • Terms up to 35 years
  • Fixed-rate options up to 10 years
  • Standard Loan to value 95% (up to 120% available)
  • Employed and self-employed
  • Pension income accepted as sole income
  • Benefits income accepted as sole income
  • Complex affordability cases considered
  • Unusual properties
  • No Early Repayment Charge options
  • Buy-to-let

Just a few great reasons to work with Clever Lending:

  • Personal service from a passionate team
  • Ability to find solutions – outside the box thinking
  • Positive outcomes
  • Multiple lending options
  • Extensive lender panel
  • Market-leading rates

Additional benefits:

  • 24-hour turnaround on DIPs
  • Competitive commission rates
  • Advice and recommendation or package only service

Our online broker portal Clever+ allows you to:

  • Submit an enquiry at any time from any device
  • Track all cases 24/7 in real-time
  • Upload documents with drag-and-drop faciality in a secure environment, which can be accessed quickly and easily

Register with Clever Lending and access Clever+ here

Call 0800 316 2224

Email enquiries@cleverlending.co.uk

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