Specialist Lending - May 2017  

What kind of clients are taking advantage of second charge?

This article is part of
Guide to second charge lending

“We recently did a second charge for a client to clear a large tax bill avoiding court action,” Mr Dyason says. 

“Another client looking to buy a property that was not mortgageable (wooden with a short leasehold) raised money on his buy-to-let despite having a significant early repayment penalty and remortgaged the whole amount at the end of the tie in period.”

He adds: “We have done a second charge to help clients clear debts that were eating up all disposable income and edging towards payment default, making sure the affordability was eased and allowing them to plan better for the future.”

Quick process

Andrew Fisher, managing director at mortgage broker Freedom Mortgages, explains the speed at which a second charge can be processed means it is useful for those who need access to funds at fairly short notice.

“Whereas a first charge mortgage typically takes 40 days to complete, a typical second charge mortgage can be completed within just two weeks – making it a viable and efficient option for people looking to secure extra finance, where speed is a priority,” he notes.

He confirms second charge mortgage products can be used for a wide variety of loan purposes and has seen a lot of his own customers using this type of borrowing, in addition to their existing first charge mortgage, to avoid early repayment fees. 

“We are also taking lots of enquiries from customers who already have a low-rate first charge mortgage and want to maintain this rate while raising additional funds. 

“Our customers are using finance from a second charge mortgage for a variety of purposes, from a new car, to refurbishing homes or even setting up a new business,” Mr Fisher notes.

Joshua Gerstler, financial adviser at The Orchard Practice, tends to find the clients he introduces to second charge lending “are those who want to consolidate debts to reduce their monthly outgoings and for whatever reason are unable to do this via a first charge mortgage, which would be cheaper for them”.

He explains how this works in practice for a client with a bill to pay and a history which would usually go against him.

“I had a client of mine recently look at second charge lending because he needed to raise funds to pay a tax bill to HMRC but was unable to do so with a first charge mortgage due to his poor credit history,” Mr Gerstler says.