Second Charge Mortgage Advice – Case Study
Case Study – London Property
One of our new clients, Simon from London called and asked about the possibility of raising capital using the equity from within his own home. He specifically asked about second charge mortgage rates and whether this was the best way of raising capital using his home as security. He needed some Second Charge Mortgage Advice.
How it works!
Simon had heard about second charge mortgage advice being available and various deals being available. He did not really know how it works and whether it was the best way forward for his needs. Simon really wanted to know how the whole process works.
There are several ways of raising capital using the equity within a property and second charge mortgages are just one way of doing it. We are always going to need to gather information about the clients’ current financial circumstances and why they want to raise capital before providing advice. This is so we can provide Second Charge Mortgage Advice to Simon.
In Simon’s case, he is a homeowner with a Halifax fixed rate mortgage exceeding £275,000. Simon is happy with his current mortgage deal as the rate is very good and the fixed rate element of the mortgage gives him some peace of mind against interest rate rises. He has 3 years remaining on his 5 year fixed rate product and there is an early repayment charge for leaving the mortgage early.
Simon is looking at getting a second charge mortgage to capital raise so that he can build an extension and also for debt consolidation purposes. Simon was also concerned about getting a second charge mortgage with some bad credit against his name. He showed us his credit report and since taking out his Halifax mortgage he had unintentionally missed some mortgage payments not long after taking out the new mortgage.
Our advice was for Simon to keep his main mortgage with the Halifax as first legal charge and take out a separate second charge mortgage loan for the additional money he requires. If we helped him remortgage to a new lender we would face the following issues:
1) Simon would have to pay an Early Repayment Charge for leaving the Halifax “fixed rate” deal early. This would be either 3% or 4% depending on when the loan was redeemed. On an outstanding mortgage of £275, 000, this would be over £8,000 and maybe as high as £11,000.
2) If we remortgaged Simon to a new lender we probably will not be able to get him a fixed rate as low as what he is on now, especially as he now has some adverse credit history registered on his credit file.
3) Remortgaging would take a lot longer to arrange than putting a second charge secured loan in place.
Second Charge Mortgage Advice
Our Second Charge Mortgage Advice to Simon on this occasion was to leave his main mortgage with the Halifax and take out a second charge mortgage for the amount he wishes to capital raise. This is not just for the above reasons but also because he will have a low-interest rate on his main mortgage which is 4 to 5 times larger than what his second charge loan will be. Paying a lower interest rate on the main mortgage and a higher rate on the second charge loan works out to be more cost-effective than remortgaging Simon to another lender.
Please watch the video below about getting Second Charge Mortgage Advice or view this video on YouTube:
Read our main page on Second Charge Mortgages
Please also read our Remortgage Review
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