Second Charge Mortgages
Second charge mortgages can offer the ideal alternative to a remortgage or other types of unsecured loan. With rates from just 3.65% they can be a cost-effective way of borrowing – especially if the client already has an existing first charge mortgage with high early redemption penalties, or an attractive interest rate that they don’t want to lose. Enterprise has access to some of the best loans in the market.
What is a Second Charge Mortgage? [Video]
Your client might be looking to borrow for any number of reasons, from consolidating expensive debts to funding home improvements or even a buy-to-let mortgage. Whatever their need, the common route of remortgaging a property might not always be the most appropriate option for your client.
Remortgaging could mean foregoing a favourable interest rate, or it may force your client into paying an expensive early redemption charge. And for some clients, remortgaging might not even be an option due to the lending criteria following the Mortgage Market Review.
In such instances, a secured residential second charge mortgage might prove far more suitable. For a start, they can prove cost-effective as there are no initial costs for clients to pay. Second charge mortgages might also be easier to obtain for those with a poorer credit rating – and the amount that can be borrowed is often higher than a standard ‘unsecured’ loan.
Enterprise not only source secured second charge mortgages from lenders across the whole market. We also find solutions for any type of borrower – whether you are looking on behalf of a prime client or one with credit issues. The large volumes of business that we place also mean we negotiate some of the best deals on behalf of you and your clients.
Second Charge Mortgages: Main Features
- Interest rates from 3.65%
- Loans are available up to 95% LTV
- Buy to let second charge mortgages available up to 85% LTV
- Impaired credit loans available up to 75% LTV
- Up to £2,000,000 standard lending criteria (more available by exception)
- No costs for the customer incurred until completion – including valuation and legals*
- Fixed rates available with no extended tie ins
- Market-leading commission
- Peace of mind that your clients’ cases are being dealt with by the industry’s leading professionals
Second Charge Mortgage FAQs
What is a second charge mortgage?
Whereas most standard loans are unsecured, a second charge mortgage is a secured loan. This means a client can borrow money from a bank using any equity in their property as a security measure for the lender. As such, it is only available to property owners. (It is called a ‘second charge’ mortgage simply because the primary mortgage on a property is referred to as the ‘first charge’ mortgage.)
What are the main benefits of a second charge mortgage?
Second charge mortgages are often cheaper as there is less risk involved for the lender. They can be easier to obtain for those with a poorer credit rating too. And the amount a bank will lend is often significantly higher than the maximum that can be borrowed using a normal unsecured loan (which is only £35,000).
Who can apply?
Any property owning individual can apply for a second charge loan with Enterprise.
What is the repayment term on a second charge mortgage?
The repayment term can be anywhere from five to 30 years.
Is a second charge mortgage more or less risky than a standard loan?
As a second charge mortgage is secured, it implies that the lending institution has more security. This is because the borrower is offering an asset (their property) as a security. But while it is safer for lenders, it is riskier for the borrower. If they fail to meet the loan terms then they can effectively have their property repossessed.
How much can my client borrow?
Where a second charge mortgage is used to buy property, the borrower can apply for:
- Up to 95% loan-to-value on residential properties
- Up to 85% loan-to-value on buy-to-let properties
- Up to 75% loan-to-value for clients with credit problems
Are second charge mortgages interest-only or repayment?
Both interest-only and repayment options may be available depending on the client’s circumstances.
Which type of property can a second charge mortgage be secured against?
The following properties can be used against an Enterprise second charge loan:
- A primary place of residence
- Buy-to-let properties
- Commercial properties
What reasons might a client apply for second charge mortgage?
There are many reasons you might consider a second charge mortgage for your client. These commonly include:
- if they want or need to consolidate other debts
- if they require access to capital but have a bad credit rating
- if they need to raise capital quickly (with Enterprise, second charge loans are typically completed in around three to four weeks from application)
- if they want to avoid paying an early repayment charge on an existing mortgage
- if the interest rate on their current mortgage is really low and they do not want to lose it by remortgaging
- if they require funding for home improvements
- if their business needs extra funding (something many mortgage lenders are not willing to consider with remortgaging)
- paying a tax bill
- paying school fees
- to raise a deposit to buy an investment property
Does my client pay any initial costs on a second charge mortgage?
Enterprise cover all initial costs before a loan completion, when setting up a second charge mortgage secured against a residential property (including the valuation costs). The costs are only payable by the client if the loan does complete. Clients do have the option to pay some or all costs upfront or add these to the loan amount, subject to affordability.
Our team of underwriters is experienced in assessing loan applications, and therefore will let you know whether a loan application is likely to succeed before an application is even processed. This way we are able to manage expectations and save you and your client time and money.
When arranging a second charge mortgage on a BTL property, the client will pay for their own valuation.
How long before I am in a position to tell my client if we can proceed with their application?
Our experience means that in most cases we will be able to confirm almost straightaway whether your client’s application is likely to be successful.
How long will an application take to complete?
From the initial enquiry to completion, our average turnaround time for a second charge mortgage is three to four weeks.
What commission do Enterprise pay to intermediaries on a second charge mortgage?
Commission typically varies from 1% to 5% of net loan amount depending on the product provider.