Want some extra funds? Read how!

Hey! Steve here!

Todays' question...

How do I take more equity out of my house, quicker, easier and without as much hassle?

The answer is simple...

A second charge.

Now, before you write them off and stereotype them as expensive or for people with bad credit, let me get a few facts straight.

Back in the second half of July this year, one of the weekly news emails was all about second charges. I covered what, why, how etc. So please make reference to this as it was pretty comprehensive and points out some common misconceptions.

This time I want to give you some real, live case studies to help show why they solve a real problem, especially in today’s climate.

Case Study 1 – Credit Score & Affordability

Our mortgage team had been working on this one for a while. The mortgage was failing due to a few reasons:

1. Credit score – not missed payments but had significantly high credit and credit card balances at the limits which was dragging his credit score right down.
2. Affordability – income that mortgage lenders would not use for whatever reason and two?hire purchase agreements eating into their?affordability.

We spoke with the second charge lenders out there and got an agreement no problem.

Because the loan was being used to clear the credit, they saw in hindsight that this would improve our clients credit score long term. Also, they took into consideration that they had no missed payments despite the debt levels being high. No issue with income as their accounts clearly confirmed accurate earnings. On the affordability, yes the car payments were high, but the lenders could see that their outgoings were coming down by almost 50% so did not see affordability to be an issue.

Taking the above into account, our client scored on the best interest rate available on their current loan to value.

Case Study 2 – Speed & Existing Penalties

This client was tied into his mortgage for another two years and had just taken out a bridging loan which he wanted to clear ASAP.

With the high ERC’s (Early Repayment Charges) on the mortgage, it wasn’t cost effective to raise money and switch lenders. Also, a further advance with the existing lender wasn’t a possibility for a few reasons.

We got an AIP (Agreement In Principle) for a Second Charge that the client can merge into his mortgage once the fixed rate comes to an end.

Although the rates tend to be marginally higher, because the term can be as long as the main mortgage or longer, they aren’t that much more expensive and can be consolidated as soon as the penalties on the mortgage end.

Case Study 3 – Income & Affordability

The challenge with this client was down to income and affordability.

Mrs had just moved from being a Sole Trader to a Limited Company a year ago which mortgage lenders do not like. The Second Charge lenders were more than happy to base the affordability on the Sole Trader income as it was evident the business was successful and there was no reason for this to change.

Mr was also heavily commission based (typically 50% of this is used). As he had consistent commission income, the lender was happy to take this and use 100% of it.

So the combination of being able to use the self employed income for Mrs and all the commission for Mr meant the client could borrow what they wanted to. Flexibility and logic was applied.

So, three very common and real situations where solutions were found and clients were able to move forward.

?Other examples include:

• Being able to keep your preferential mortgage rate (even more important now rates have gone up).
• Purpose of the loan – Greater flexibility means funds can be used for business purposes, paying tax bills or consolidating debt above ￡30,000 as examples.
• Complex clients – Self-employed, contractors and those with multiple streams of income are easier to get funding for.

That’s it from me. Have a great week and any questions at all, please get in touch by clicking on the link below!

All the best,

Steve

Express Mortgages is a trade name of Express Mortgage Services Ltd. Express Mortgage Services Ltd is authorised and regulated by the Financial Conduct Authority. [Reg No: 474427] Company registered in England & Wales no. 05167662

Your home may be repossessed if you do not keep up repayments on your mortgage.