Five Top Tips to Spot a Second Charge Customer.
- Interest only mortgage customers.
For some consumers, staying on their existing interest – only mortgage is the best option for them. However many believe that the only way to obtain further credit is if their current mortgage arrangement is switched to a repayment option. For many this will make their monthly repayments rise dramatically, making it unaffordable. A second charge mortgage will allow the customer to borrow additional money without interfering with their existing mortgage.
- Lifetime tracker customers.
With interest rates at a historical low of 0.5% and speculation about a rate rise now common, some customers will want to move to a fixed rate. However, a fixed rate mortgage will almost always carry early redemption charges that can cost customers thousands of pounds in fees if they choose to opt out before the initial product term has ended. Plus some may find it difficult to remortgage to equivalent or lower rates. For these customers a second charge loan should be considered as it will sit behind the customers existing first charge mortgage, with minimal exit fees or changes to terms and conditions.
- Customers who want to consolidate credit.
Many customers will owe money on more than one credit card or have several different credit agreements or loans in place.
This can make keeping track of them all very difficult and could lead to serious consequences if missed.
Consolidating debts can take the difficulty out of managing a client’s money. It has become increasingly difficult to source consolidation loans, particularly if over £30,000.00 on the high street, as these lenders prefer simpler cases.
Second charge loans not only allow the customer to consolidate debts over a longer term than an unsecured loan, but also give then the flexibility to have a shorter term than their first charge mortgage whilst reducing their monthly outgoings.
- Self-certification mortgage customers
Self-certification mortgages, known for being popular with those who had irregular earnings, were banned in 2014 following the mortgage market review. However , nearly half of all mortgages taken out between 2007 and the beginning of 2010 were advanced on this basis , leaving many consumers as ‘mortgage prisoners’ trapped on very high interest rates and unable to borrow as lenders continue to tighten their lending criteria . These customers won’t be able to get any more funding on a self-certification based
- Self-employed customers
If a customer has become self-employed in the last couple of years, he or she is likely to have a mortgage application rejected due to lenders needing extensive proof of income. They may however be eligible for a second charge loan as lenders will take into account all income, including buy to let rental yield and foster care along with many other benefits.
Until next month,
Ian Chambers @HoskinHomeLoans
Hoskin Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority number 613005. The guidance and/or advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK. Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
