Second Charge Mortgages
Second charge mortgages can provide a good alternative to remortgaging. The funds can be used for many different purposes such as debt consolidation, home improvements and funding one-off purchases.
They have many advantages too, such as preserving the benefits of a promotional or low rate first mortgage along with avoiding Early Redemption Charges (ERCs) where relevant.
In addition and where used sensibly for consolidation purposes the rate of interest is often lower than existing unsecured credit or may be used to assist a customer to resolve any short term financial needs or resolve the effects of historical financial difficulties.
Second charge mortgages can be used for a wide range of purposes and are very versatile for many situations.
Some common uses are explained below:
- Debt consolidation: For clients who have various unsecured credit accounts such as loans, credit and store cards and are finding it hard to keep track of all the payments each month.
- Home improvements: A second charge mortgage can provide the funds for your customers to carry out extensions or refurbishments which could enhance the value of their property.
- Major purchase: Second charge mortgages can be used to finance a significant life event such as a wedding or new car.
There are potentially many advantages of a second charge mortgage compared to other forms of borrowing. Below are just some of the instances where a second charge mortgage can benefit your clients:
- Where used for consolidation purposes the customer might benefit from reducing their monthly outgoings and also the number of payments they are making.
- As an alternative to re-mortgaging when the customer might benefit from the retention of a promotional or low rate product on their current first mortgage. If your client is currently enjoying a low or promotional rate on their first mortgage and re-mortgaging would disadvantage them, then a second charge mortgage might be a suitable alternative
- Many mortgages have ERC’s which means that if the customer pays off their existing mortgage by means of a re-mortgage they may have to pay redemption penalties. A second charge mortgage provides a real alternative enabling the customer to raise additional funds without incurring these charges
- As an alternative to unsecured credit given that second charge mortgages have rates that second charge mortgages often lower than other forms of unsecured borrowing resulting in the customer paying less interest than they might have done in utilising unsecured credit
- As an alternative to bridging finance as generally second charge mortgages can be structured over a longer term and on a monthly instalment.