Almas Uddin
Founder and Mortgage Advisor
21 Jan 2020
Second charge mortgages:
are loans which are secured against your property, as the name suggests this loan is second to the first charge, which would be likely for a larger amount of borrowing, probably taken out when you purchased the property at the onset.
Historically, when borrowers where turned down for financial support they may have been attracted to the higher risk, higher interest providers for their borrowing needs! Second charge mortgage rates are higher than the traditional rates but a lot lower then some of the ‘back street’ lenders out there.
In recent years second charge mortgages have come under scrutiny and, are now regulated by the standards set by the Financial Conduct Authority through the Mortgage Credit Directive. As a consequence, second charge mortgages have become a ‘low cost’ option for home owners who need funding.
As the BTL lending rules evolve we see lenders upping their stress test calculations. Historically the norm of 125% at 5% was the standard however, we see lenders using 140-145% at 5.5% especially for higher tax payers.
Remortgage or Second Charge – The Highlights
Reasons for lending?
Remortgages have a stringent approach on what they will lend for.
Second charge mortgages criteria will consider any legal purpose.
Loan to income?
Remortgages will normally only lend 4-5 times your income
Second charge mortgages will consider lending higher multiple of your income subject to affordability calculations and stress tests
Adverse credit?
Remortgages will scrutinise the whole of your credit history.
Second charge mortgages will review credit history however every case is reviewed on its own accolades, in certain cases they may not even look at your credit file.
Effect on your existing interest only mortgage?
Remortgages are often against interest only products.
Second charge mortgages will raise funds, running simultaneously with your existing first charge mortgage unaffected.
ERC’s?
Remortgages will incur penalties for exiting, these can range from 1 - 3%.
Second charge mortgages are taken out without effecting your original mortgage, therefore no ERC’s to look forward to!
A quick guide to second charge mortgages:
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no legal fees
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rates start from around 3.73%
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interest only available
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loan repayable up to the age of 85
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loans can range from £10,000 up to £2.5m
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second charge term may exceed first mortgage term
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discounted, variable, fixed & base tracker rates available
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reasons for lending that are entertained:
paying a tax bill
paying mortgage arrears
home improvements
business needs; new / existing
paying a partner
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12 months self-employed accepted
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employment probation periods accepted
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ERC’s from 0 – 3%, product dependent
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up to 30 year terms available
Give us a call on 0330 304 3040 and one of our experts will assess your circumstances.
Here at Revolution Finance Brokers, we are independent brokers in Essex, Kent, London and Hertfordshire, our affiliation is with no one lender, our advice is based on your needs. Before we speak to any lenders will we fully understand your situation and based upon that we will secure the best possible products, at the best possible rates.
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