January 15th, 2018. Chris Evans
Is a Second Charge Mortgage a Good Idea? The Pros and Cons Revealed
Second charge mortgages have seen a surge in popularity over the last year or so, but is taking out a second mortgage a good idea for you? Let’s examine the benefits of a secured loan like this.
Second Charge Mortgages Are Up 20%
In recent years, the secured finance market has become stricter. There has been additional legislation introduced which means lenders must apply tougher vetting or ‘stress tests’ which ensures borrowers can make repayments.
This means greater protection from debt. However, it could also mean securing extra funds from your original lender becomes more difficult if your situation has changed. Therefore, as a result many financial advisors are suggesting taking out a secured loan like a second charge, rather than remortgaging.
This has quickly become one of the main reasons for a surge in second charge mortgage applications.
According to recent figures from the Finance & Leasing Association, second charge mortgage new business increased by 20% on annual basis in October 2017, as well as 19% in volume, and is now one of the fastest growing forms of finance in the UK.
The Benefits of Taking Out a Second Charge Mortgage
Independent from Other Finance – A second charge sits behind your existing mortgage, but is completely independent. Therefore, it will not affect your current attractive interest rate and there will be no expensive exit penalty like when remortgaging.
More Flexible Criteria – If you have lost your job, retired, fallen ill, or had any other major change in your personal circumstances, your existing lender may not agree to increase you first mortgage should you require additional funds. As this type of loan is secured against your property, a specialist second charge lender is more likely to be lenient if a broker presents your case in the right light.
Affordable Rates – As a second charge you should expect to pay a higher interest rate than your first mortgage. However, greater competition in the marketplace means interest rates are being pushed down, making it more affordable than some alternative forms of finance.
No Overpayment Fees – Many second charge mortgages will come without overpayment fees. So, you can repay the loan before the term ends or remortgage in future without complication.
Consolidate Debt for Easy Management– Second charge mortgages can be used for raising capital, but they can also be an effective way of consolidating debt. For example, it may prove beneficial to combine credit card debt, overdrafts, car loans, student debts etc. in order to make managing your finances a little more straightforward.
A second charge will likely provide lower interest rates and a longer repayment term too.
Weigh Up the Cost
A specialist second charge broker, like Pure Property Finance, can help calculate the costs and present you with some of the best second mortgage rates for your personal circumstances.
Learn more about second charge mortgages and secured finance, then get in touch with our team on 02920 766 565 to see what we could do for you.
Article By Chris Evans
January 15th, 2018
Chris heads up the specialist mortgage team which encompasses first charge mortgages, buy-to-let finance and second charge loans.
Chris has spent the last 17 years gaining experience in mortgages, protection and secured loans with roles at Legal & General, Nemo and Mortgage advice bureau giving him a broad understanding of the property finance markets.
Having Joined the Pure Group in 2017 he has worked with Ben to establish and grow the 1st and 2nd charge proposition exponentially in a short period of time. Chris has overseen the recruitment and development of an extremely experienced team of employed and self employed advisers that continues to deliver year on year growth.See more articles by Chris