27th February 2024
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Second Charge Mortgages
If you are in the market for a second charge mortgage, our team of distinguished brokers is here to help. At Mortgage Lane, our advisors have hands-on experience in the field of second charge mortgages, ensuring that we provide informed and relevant advice. We cater to a diverse range of clients, from individuals embarking on their first second charge mortgage with less-than-perfect credit to seasoned borrowers managing multiple loans. Our expertise is tailored to understand and meet your unique needs.
PROCESS BREAKDOWN
1
Information gathering and advice
The first process in your second charge mortgage application will be gathering or updating information in relation to the existing mortgages, property, tenants, or yourself. Once this has been established your expert second charge mortgage broker will make a product recommendation.
2
Credit approval
Once you are satisfied with the product recommended and have confirmed to proceed, this will usually be submitted the same day to give you a decision, until this point there is still nothing to pay! As long as the Agreement in Principle (AIP) was approved, we can move to application stage where fees become payable.
3
Application, valuation & underwrite
Once the application is submitted, your valuation will be booked in and most of the time (depending on the lender). This will usually completed once your initial underwriting has been completed. Once the valuation is returned, if acceptable, the lender would then look to make a formal offer. You can then move to legal stage.
4
Offer and completion
Once you have had your second charge mortgage offer, you will require adequate legal advice and then once you’re happy, your solicitor can draw this down once the legal requirements are satisfied. Your broker at Mortgage Lane will always be checking in on the application post offer, so we are chasing for you too!
Second Charge flexibility
At Mortgage Lane, we specialise in leveraging second charge mortgages for capital raising on both residential and buy-to-let properties. This approach is a savvy solution for those looking to access funds without incurring exit charges from their existing mortgage. Additionally, second charge mortgages often offer a more favourable loan-to-income ratio compared to existing lenders or high street options. This can result in a more generous loan amount, providing our clients with greater financial flexibility and the opportunity to meet their investment or personal finance goals effectively.
Types of second charge mortgages
We assist both home owners and investors with second charge mortgage advice. Below we explain all the types of variations you might come across as well as information on different ownership types and how this can impact your mortgage options.
Residential second charge mortgages
Mortgage Lane is your go-to mortgage broker for accessing second charge mortgages in the UK. We specialise in connecting homeowners with specialist lenders, many of which are accessible exclusively through brokers like us. We take pride in being part of select closed panels, which grants us a wider reach and enables us to offer unique lending options that you might not find elsewhere.
What You Can Achieve with Second Charge Mortgages
Homeowners can secure Loan to Value ratios (LTVs) of up to 100% with second charge mortgages. This flexibility means you can utilise these funds for a variety of purposes, such as:
Home improvements
Reinvesting in buy-to-let properties
Business ventures
Personal purchases
Debt consolidation
Why Consider a Second Charge Mortgage?
A second charge mortgage becomes a viable option in several scenarios. For instance, your current lender might not be able to offer the additional loan size you need, or they might not offer further lending at all. Second charge lenders often have more generous loan-to-income ratios compared to high street lenders, making them an attractive alternative when avoiding the requirement to repay any exit charges on the current product. Often second charge mortgage products come without exit fees, so borrowers looking to remortgage once their fixed term is up on their principle mortgage, they can do so without additional exit fees.
Moreover, many homeowners find themselves in a situation where they have a mortgage with a low interest rate and a favourable fixed term. If you need to raise capital but don’t want to disrupt your existing mortgage arrangement, a second charge mortgage can be an ideal solution. This is particularly relevant if you have incurred some adverse credit since taking out your first mortgage.
Flexibility with Adverse Credit
Second charge mortgage lenders are known for their flexibility regarding adverse credit. This understanding and accommodating approach make second charge mortgages a feasible option for borrowers who may have faced financial challenges in the past.
Building on the advantages of second charge mortgages, it’s important to note the inclusive approach many second charge lenders take regarding income consideration. Unlike some traditional lenders, second charge mortgage providers often accept a broader range of income sources, sometimes up to 100% of incomes that might not be considered by your current lender. This inclusive approach can significantly enhance your borrowing potential.
Diverse Income Sources Accepted by Second Charge Lenders
Second Jobs: If you have additional employment, second charge lenders may consider this income fully in their assessment. This is particularly beneficial for those who rely on supplementary income to meet their financial goals.
Property Income: Income generated from property investments, such as rental income, is often fully recognised. This can be a crucial factor for landlords or property investors looking to leverage their property portfolio.
Trust and Investment Income: Earnings from trusts, dividends, and other investment sources can also be taken into account. This aspect is particularly advantageous for individuals with diversified investment portfolios.
Legal Consent Requirement: It’s important to note that obtaining a second charge mortgage requires the consent of the first charge lender, acknowledging the secondary claim on the property’s equity.
Other Sources: Other forms of income, such as freelance or contract work, which might not always be fully considered by traditional lenders, can be included in the assessment by second charge mortgage lenders.
This flexibility in income assessment means that your total borrowing capacity could be higher with a second charge mortgage, compared to what you might be able to secure with a further advance from your current lender. It opens up opportunities for a wider range of borrowers, especially those with complex income structures, to access the funding they need.
At Mortgage Lane, we understand that every financial situation is unique, and our aim is to provide tailored solutions that meet your specific needs. With our access to specialist lenders and our expertise in the industry, we are well-equipped to guide you through the process of securing a second charge mortgage that aligns with your financial goals and circumstances. Whether it’s for home improvement, investment, or any other purpose, we’re here to help you unlock the financial potential of your property.
Mortgage Lane Limited is authorised and regulated by the Financial Conduct Authority for credit broking and mortgage advice (FCA 937192). Your property is at risk of repossession if you do not keep up repayment of any loans secured against it. This is not financial or legal advice, always speak to a qualified professional.
Buy to let second charge mortgages
Mortgage Lane specialises in second charge mortgages, a powerful financial tool for homeowners seeking additional funding without impacting their current mortgage terms. Second charge mortgages offer a flexible solution, particularly for those who might not be eligible for a further advance from their existing lender, often due to having adverse credit.
Why Choose Second Charge Mortgages?
Ideal for Adverse Credit: Second charge mortgages are especially beneficial for applicants with adverse credit. They provide an alternative route to finance when a further advance isn’t feasible with your current lender.
Avoiding Exit Charges: They allow you to retain your existing mortgage, especially if it has favourable terms, without incurring exit charges associated with refinancing
Versatile Funding Source: These mortgages can be used for various purposes, such as home improvements, investment in buy to let properties, or consolidating debts.
Legal Consent Requirement: It’s important to note that obtaining a second charge mortgage requires the consent of the first charge lender, acknowledging the secondary claim on the property’s equity.
At Mortgage Lane, we understand the unique financial situations of our clients. Our expertise in second charge mortgages ensures that you have access to the necessary funds, even in complex credit situations. We navigate the legalities and liaise with lenders on your behalf, making the process seamless and efficient. Whether you’re looking to unlock the equity in your home for investment or personal use, our team is here to assist with tailored second charge mortgage solutions.
Specialist second charge mortgage options
We work with specialist lenders that allow for complex criteria points, which proves helpful to borrowers looking to capital raise from their home or investment property without disturbing their main, principle mortgage.Specialist scenarios we assist with:
- Adverse credit
- Self employed
- Debt consolidation
- Capital raising
- Buy to let
TRY OUR SECOND CHARGE MORTGAGE CALCULATOR
ANSWERS TO COMMON QUESTIONS AND QUERIES ABOUT SECOND CHARGE MORTGAGES
What is a second charge mortgage?
lender. This is a crucial step in the process of securing a second charge mortgage. Your first mortgage lender needs to give permission for a second charge to be placed against your property.
This consent is essential because it acknowledges that the second charge lender will have a claim on the property, subordinate to the first charge. In other words, in the event of a default, the first mortgage lender has priority in claims over the property, and the second charge lender can only claim any remaining equity afterwards.
At Mortgage Lane, we assist our clients in navigating this process. We liaise with your current lender to obtain the necessary consent, ensuring a smooth and hassle-free experience for you. Understanding the requirements and obtaining this consent is part of our commitment to providing comprehensive mortgage solutions.
Will I need a valuation for a second charge mortgage?
No, a valuation is not always required for second charge mortgages, but it depends on the lender’s policy. Some lenders might ask for a property valuation to assess the current value of your home before approving the second charge mortgage. However, others may opt for an Automated Valuation Model (AVM) or a desktop valuation, which are less intrusive and quicker methods of estimating your property’s value.
In cases where a higher Loan to Value (LTV) is being requested, lenders are more likely to require a physical valuation report to ensure a more accurate assessment of the property’s worth. This is especially true if the requested amount is a significant percentage of your home’s value.
At Mortgage Lane, we work with a variety of lenders in the second charge mortgage market. We can guide you through the specific requirements of each lender, including whether a property valuation is necessary for your second charge mortgage application. Our expertise ensures that you are well-informed about all aspects of the process, helping you to make the best dec
Will I need a minimum income for a second charge mortgage on a buy to let?
Whilst some second charge mortgage lenders do enforce a minimum income requirement (often £25,000), the majority of lenders do not have a minimum income requirement, as long as some level of an income can be evidenced.
What is the max Loan to Value on a second charge mortgage?
For residential properties, the LTV ratio for a second charge mortgage can be higher, with some lenders offering up to 100% LTV. This higher ratio allows homeowners to borrow a larger sum against the value of their residential property, taking into account their existing mortgage and the second charge.
The maximum Loan to Value (LTV) ratio for a Buy-To-Let (BTL) second charge mortgage typically goes up to 75% of the property’s value. This means the total borrowing (your first mortgage combined with the second charge) can be up to 75% of the current market value of your BTL property.
At Mortgage Lane, we understand the distinct financial needs of both BTL and residential property owners. We collaborate with a variety of lenders to provide you with options that best suit your property type and financial requirements, ensuring you find a second charge mortgage solution that aligns with the available maximum LTV ratios. Whether you’re looking to leverage equity in a BTL or residential property, our team is here to guide you through the process.
How do I get a second charge mortgage with bad credit?
Similar to residential mortgages, there are lenders in the second charge mortgage market who cater to applicants with adverse credit histories. Whether you have experienced missed payments, County Court Judgments (CCJs), defaults, or even an Individual Voluntary Arrangement (IVA), we at Mortgage Lane can help you find a suitable second charge mortgage lender for your needs.
For those who have been discharged from bankruptcy, the range of available options typically improves after 3 years, and further still after 6 years. This gradual enhancement in lending choices reflects the lenders’ approach in assessing the risk and financial stability of applicants over time.
At Mortgage Lane, we understand the challenges that come with adverse credit, and we are committed to sourcing the most appropriate second charge mortgage options for you, ensuring that your financial circumstances are comprehensively considered.
Are buy to let mortgages regulated? Are buy to let second charge mortgage regulated?
It is important to note that second charge mortgages are not covered by the Financial Services Compensation Scheme, so borrowers should ensure they are dealing with a reputable lender.
Do second charge mortgages come with exit fees?
No, second charge mortgages do not generally come with exit fees, but it’s important to note that some lenders may impose them. The presence of exit charges depends on the specific terms set by each lender.
However, the majority of second charge mortgages do not have exit fees, which makes them an attractive option for borrowers who might be considering refinancing. This lack of exit fees is particularly beneficial for those looking to refinance both their principal loan and second charge to another lender at the end of their principal loan’s fixed term
The flexibility offered by second charge mortgages without exit fees provides borrowers with the freedom to explore better or more suitable financing options when their current mortgage term ends, without incurring additional costs.
At Mortgage Lane, we can help you navigate the various terms and conditions of different second charge mortgage lenders, ensuring you find a solution that aligns with your future financial plans, including any potential refinancing strategies.
If I take a second charge mortgage will I have 2 mortgages?
Yes, if you take out a second charge mortgage, you will effectively have two mortgages on your property. Here’s how it works:
First Mortgage: This is your primary or original mortgage that you took out to purchase the property. It holds the first charge on your property, meaning in case of a default, this loan gets priority for repayment from the sale of the property.
Second Charge Mortgage: This is an additional loan secured against the equity in your property, which you may take out for various reasons like home improvements, debt consolidation, or investment in other properties. The second charge mortgage is subordinate to the first mortgage. In the event of a sale due to default, the proceeds would first go towards paying off the first mortgage, and any remaining amount would then go towards the second charge mortgage.
It’s important to manage both these mortgages responsibly, as failing to keep up with payments on either could risk losing your property. Additionally, when considering a second charge mortgage, it’s essential to assess your financial situation to ensure you can comfortably manage both repayments.
Can I overpay on my second charge mortgage?
Yes, some lenders offer a 10% overpayment facility, per annum. But it is key to understand that every lender is different and some do not allow overpayments at all without penalty charges.
Where do you broker Second charge mortgages in the UK?
We assist our clients with buy to let mortgages in England, Wales, Scotland, and Northern Ireland.
Learn more about Mortgages with Mortgage Lane
At Mortgage Lane, we see the most complex of second charge mortgage applications, some of which make a good read for investors looking to learn from other applicants challenges, or for those effected by the topics! See more buy to let mortgage topics covered in our blog here.
BEGIN YOUR SECOND CHARGE MORTGAGE JOURNEY WITH US TODAY
Let us know about your enquiry and one of the team at Mortgage Lane will be in contact to assist!