Case study: Second charge mortgage to clear credit debt
A couple needed to add a downstairs bedroom and bathroom to their home to improve their daughter’s standard of living. The couple approached their bank for a loan and were poorly advised to pay for the refurbishment work on their credit cards. The Mortgage Adviser in their bank planned to help them to raise funds to clear the credit card debt through a further advance when the work was completed. Unfortunately, when they returned to the Mortgage Adviser in their bank, their debt to income was too high for them to capital raise to consolidate the debt.
The couple had accrued £100,000 worth of debt across multiple credit cards and were paying £2,999 per month on their credit cards. Unsure how to consolidate the debt, they contacted a local Mortgage Adviser to find out whether they could remortgage their house with another lender to clear the credit card debt. The Mortgage Adviser reviewed their circumstances but was reluctant to let them move their mortgage to another lender because they were tied into a competitively priced five-year fixed deal that wasn’t due to expire until June 2021. Remortgaging now would mean the couple would have to pay expensive early repayment charges.
The Mortgage Adviser contacted Ingard’s Specialist Team for help. Ingard’s Specialist Team reviewed the case and provided the Mortgage Adviser with an illustration demonstrating that although there were some first charge mortgage lenders who would consider the case, the cheapest option was actually a second charge mortgage. The illustration clearly highlighted the cost difference when you factored in the cost of the early repayment charges (if remortgaging) and total cost of the loan including interest rates and fees.
The customer was happy to proceed with a second charge mortgage product financed by Shawbrook Bank. Ingard’s Specialist Team processed the case directly with the customer from this point, keeping the Mortgage Adviser updated throughout the process. The case completed within just four weeks, enabling the couple to consolidate their debt into one simple monthly repayment of £657.97 per month.
The broker fee and procuration fee was split 50/50 with the introducing broker.
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This case study is for illustrative purposes only.