Second charge solutions for all

David Binney, commercial manager at Norton Home Loans, explores rising demand for second charge solutions, ongoing misconceptions surrounding the second charge market, and why the market is accessible to all types of borrowers.

Related topics:  Blogs,  Specialist Lending,  Second charge
David Binney | Norton Home Loans
9th April 2024
David Binney Norton
"The second charge mortgage market is accessible to all types of borrowers, and in many cases, can often be a more cost-effective and flexible way of raising capital."

The onward march of the second charge mortgage market continues unabated with recent figures from the Financial & Leasing Association showing two consecutive months of new business volumes growth in the lead up to January 2024.

Awareness and demand for this type of borrowing has risen in recent years as external forces such as a global pandemic, eye-watering energy prices and increasing living costs saw interest rates rise as central banks throughout the world tried to curb soaring inflation.

This spurred an uptick in demand for second charge mortgages as borrowers sought to navigate the higher interest rate environment and find ways to capital raise without losing the lower and preferential rate on their first charge mortgage.

However, with the market now starting to show signs of greater stability and recovery, there is an increased chance that some borrowers may return to the default option of remortgaging to address their capital raising needs, which is where the role of the broker comes into its own.

The fact is, second charge mortgages should be considered in discussions where borrowers are seeking a capital raising solution, such as funding a home renovation project, consolidating debt into a single and more manageable payment or even paying a tax bill.

Admittedly, there will be situations where a second charge mortgage is not the right outcome for the client’s needs, but understanding how the market works is important when it comes to determining when and where a second charge may actually be a more suitable option than remortgaging for your client.

One of the many misconceptions surrounding the second charge market is that this type of product is more expensive than remortgaging or only available to those with significant levels of debt. However, this could not be further from the truth.

The second charge mortgage market is accessible to all types of borrowers, and in many cases, can often be a more cost-effective and flexible way of raising capital. Therefore, it is always worth speaking to a specialist lender about the needs of your client before making any final decision on their borrowing needs.

Norton Home Loans for example, will consider second charge mortgage applications from all applicants between the ages of 21 and 85 years old, with loan amounts of £3,000 and £250,000 available as standard.

Borrowers with a history of adverse credit, such as CCJs, missed mortgage payments and those in a debt management plan will also be considered, provided there is proof of 12 months satisfactory conduct on the latter.

We also consider applicants of retirement age, provided the term does not extend beyond their 85th birthday. Self-employed applicants are also eligible for a second charge as long as they have been for working for one year or more.

Recently, Norton Home Loans extended the lending criteria on its second charge mortgages to also include low-income earners. This means those earning a minimum of £15,000 a year from all sources can take out a second charge mortgage, provided they meet the lending criteria.

Joint applications with incomes of between £15,000 to £19,999 will be considered provided the applicants have a minimum Equifax credit score of 350. This is reduced to 200 for those borrowers with a joint income of £20,000 and over.

Given the specialist nature of the second charge sector, there may be some brokers that lack the confidence or knowledge required to advise on this type of borrowing. Therefore, referring your client to a specialist lender like Norton Home Loans can help.

With 50 years’ experience in the specialist lending market, Norton Home Loans has the knowledge and expertise required to help brokers address the needs their clients, while also offering them a chance to tap into this lucrative area of the mortgage market.

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