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The Mortgage Credit Directive (MCD) came into force in March 2016. This required brokers to consider a second charge alongside a remortgage, when clients were looking to raise funds on their property.
Since then they have grown in popularity and the terms available in the market have improved with Second charge loans available up to 95% Loan to Value and rates starting from 3.65%.
Reasons for you to consider a second charge as opposed to a straight re-mortgage:
– Your circumstances may have changed over a period of time. You may have some adverse credit, or recently become self-employed. Some second charge lenders have more flexible criteria than the first charge market.
– There are many situations where a second charge loan can be more cost effective, such as if you have early repayment charges on your mortgage, or they are on a very low lifetime tracker or variable rate or on an interest only mortgage.
– Where you want to carry out improvements to the property that will lead to a significant increase in the value of the property. This can then allow you to re-mortgage at a lower Loan to Value and enjoy a more preferential interest rate or be allow to release additional capital out of the property.
– Borrowers that have a lot of unsecured borrowings with high interest rates can use a second charge loan for debt consolidation and substantially reduce monthly payments.
– With more stringent stress tests on Buy to let mortgages, a second charge will often enable you to release more equity from the property.
– Second charge loans are generally quicker to arrange, which can often be an important consideration when securing the purchase of an investment property.
If you require assistance with a second charge mortgage or any other type of property finance please do not hesitate to contact myself and my team using the form below.
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