There are many reasons why brokers would recommend a second charge mortgage. One of them is to help their clients protect their exisiting first charge mortgage. A second charge can unlock the required funds and leave the first charge they have untouched. There are 3 key situations:
- Lifetime base-rate trackers: many people took out lifetime trackers back when base rates were 5%+. Now, with base rate 0.25%, clients are unlikely to get the same first charge deal. A second charge for the increment may be cheaper
- Fixed-rate deals: many clients have entered longer 5-year fixed periods with ERCs up to 5%. A second charge avoids incurring ERCs that could be 5 figures
- Interest Only: at best, a further advance on an Interest Only further advances are just below 50% LTV. Otherwise, clients would only have a repayment first charge option, which could stretch affordability – especially for clients near retirement requiring shorter terms
Do you have any clients where a second charge mortgage could help protect their first? Then contact us today for a no obligation quote.