Important Information About Second Charge Loans
The loan-to-value (LTV) you can borrow for a second charge is typically lower than the first charge. This is because when loan providers are retrieving funds each month, it is the secondary priority after your initial mortgage. So if someone is having repayment difficulties, they are perhaps less likely to recover the full amount.
Some of the lenders we work with are ‘status’ and ‘non status’ lenders. The main difference is that non status lenders are not regulated and will not lend to someone if the property is their main residence. When applying with a lender, this information will be made very clear to you.
Why Apply For a Second Charge Mortgage?
Raise Finance: Second charge loans are popular for property developers looking to grow their portfolio, especially if they have some extra income and an appetite for growth. It can also be used by existing homeowners to raise money, leveraging the value of the current home. Perhaps they are struggling to get some form of unsecured loans because of their employment or credit rating, but second charges are not as dependent on credit scoring because they are based on the equity in your home. (Source: SPF Loans)
Cheaper than remortgaging: Many people will want to remortgage because their current deal is expiring or they want a better rate. However, if your credit rating has gone down, you may have to pay more interest moving forward, in which case it would be cheaper to get a second mortgage. Similarly, if you want to clear your first mortgage but it has a high early repayment charge, again, it could be more cost-effective to apply for a second charge than a remortgage.
Debt consolidation: A lot of individuals will use a second mortgage in order to receive money upfront which they can use to repay their debts, for things like student loans, credit cards, car finance and other personal loans. This can save the person money by paying off debts and therefore interest is not continue to accrue over time, making the debt more costly.
When Not To Use a Second Charge Loan
Cannot keep up with existing mortgage: If you are struggling to keep up with your existing mortgage, it is risky to apply for a second one because you risk both properties being repossessed if you cannot keep up with your repayments.
What We Offer
Octagon Capital is a registered broker which is approved by the Financial Conduct Authority. As an intermediary, we do not give advice, we can only put you in touch with the best lender that suits your requirements. We have a strong partnership with London-based SPF Short Term Finance who have years of experience handling enquiries for second charge loans. When you provide your details above, your information will be sent straight to one of SPF Short Term Finance’s dedicated advisors and they will help process your application.
Once they have confirmed your details and carried out some relevant checks, they will put you in touch with the best lender that fits your criteria. As part of the regulatory requirements, successful applicants must be offered the loans with the cheapest rates. So you can be rest assured that not only will details be in safe hands but also with the most affordable prices.
What is a Binding Offer?
When you apply, the lender will give you a personalized document commonly known as a European Standardised Information Sheet (ESIS) which:
- Explains the terms of the offer.
- Recaps some of the details of your loan application.
- Summarises features including any fees, the APRC and changes to your monthly repayments if the interest rates rise beyond a particular point
- Provides a reflection period
This document will give you seven days (and sometimes longer) to have a good think about whether or not you wish to proceed. The offer is binding meaning that the rates quoted and amount offered will stand whilst you make your decision. You can choose to proceed or decline whenever you are ready.