11 May A second charge mortgage could be a good option
A second charge mortgage could be a good option in certain circumstances. Here are just some of the circumstances when it could offer the right solution:
- You have a competitive first charge mortgage interest rate that would be lost if you re-mortgaged.
- Your circumstances have changed and perhaps you can no longer attract the same favourable terms as you have in the past, or you may have been declined. As a result of first charge mortgage affordability and eligibility criteria, a remortgage may no longer be an option.
If you have an interest-only first charge, a remortgage would require the entire debt to be repaid on a full repayment basis, which may result in more expensive repayments.
- If your first charge mortgage is subject to early repayment charges and you remortgage, this could mean additional costs.
- You require lending on a short-term basis.
- If you want to borrow £25k+. With a personal loan, you are usually restricted to borrowing around £25 – £30k.
With a second charge mortgage you could borrow to raise money to pay for a tax bill or to consolidate debt –something that may not be available if looking to remortgage.
What can a second charge mortgage be used for?
The second charge mortgage market can offer lending solutions for those looking to raise additional capital for a variety of reasons. In some cases, these options for additional finance are not readily available via a first charge option. Various lenders allow all different types of uses, so as an adviser you must choose the right product for the right purpose, so you get the correct outcome.
So, what can a second charge be used for?
Whilst most second charges are used for debt consolidation of secured and unsecured credit or for home improvements, there are in fact several uses:
- Debt Consolidation
- Home Improvements
- Business purposes
- Deposit for additional property purchase (i.e. BTL or holiday home)
- Repay a tax bill
- Medical procedures
- Car purchase
- School fees
- Gifting money to a child
- Transfer of equity
- Lease extension
- Repay Help to Buy