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Second charge mortgages: Did you know?

Posted: 16/08/2018

A recent article in Mortgage Strategy revealed that 85% of Mortgage Brokers now consider second charges, however, given market volumes have not greatly increased since MCD brought second charge mortgages inline with first charge mortgages to ensure the customer always got the best deal – this figure seems somewhat worrying. It is likely that most Mortgage Brokers are considering second charges on cases where they have exhausted all other options instead of every case where the customer requires further borrowing.

To help to give you a quick refresher on the types of criteria available, which are pretty remarkable we might add as rates start from as little as 3.85%, we’ve compiled some helpful criteria niches that you can skim whilst enjoying your next cuppa.

4 common reasons to consider a second charge:

  • Customer wants to keep their low rate or interest only first charge mortgage
  • The ERCs on the first charge mortgage are expensive
  • The customer is struggling to borrow more through a first charge mortgage lender due to affordability
  • A second charge can complete quicker than a remortgage

Examples of what second charges are typically used for:

  • Debt consolidation – store cards/ credit cards/ unsecured debt
  • Home improvements/ extensions
  • Raising a deposit to purchase a rental property or even land
  • Business start-up/ cash injection into business/ tax bill
  • Expensive purchase – car/ school fees/ wedding

Wide range of customer profiles accepted:

  • Adverse over 12 months old ignored, under 12 months considered – including bankruptcy, IVA, DMP, CCJ, default
  • Customers up to age 85 years at end of term
  • Self-employed with only 12 months accounts/ contractors/ zero hour workers/ retirees/ DWP
  • Individuals, sole traders, limited companies, LLPs, partnerships, portfolio landlords, expats

Many types of income sources can be included in the affordability assessment:

  • Salary
  • Second job
  • Regular bonus/ commission/ overtime
  • Most benefits
  • Pension
  • Investment income

Most types of properties can be used as security:

  • Non-standard constructions
  • High-rise flats
  • Ex council houses/ flats/ maisonettes
  • Business premises
  • Even land

Overview of the Key Criteria Available

  • Rates from 3.65%
  • Terms from 5-30 years
  • Loans from £10,000 to £2,500,000
  • LTV up to 95%
  • All credit profiles considered
  • Increasing number of lenders now offer AVMs to reduce the upfront cost and speed up valuations

Here to Help

For more information on the products available and the process of submitting a second charge, view our product matrix.

If you have a second charge case, then call our Specialist Team on 01702 538 800 or arrange a call back.