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Client in an ERC period and unable to secure a further advance, significantly reduces monthly expenditure with a second charge mortgage

A second charge mortgage case study - October 2018

Objective

Our introducer presented us with a case where the client wanted to raise £37k to be able to consolidate their unsecured debts.  The debts had arisen due to major home improvements to their residential property.

 

The property was valued at £230k with an outstanding mortgage balance of £162k; the additional borrowing via a second charge mortgage took the loan to value up to 87.8%.

Obstacle

As with many first charge residential mortgage lenders, the current lender weren’t able to offer a further advance for consolidation purposes at 90% LTV.  Furthermore, they were tied into a fixed rate until March 2019.

Outcome

After discussing the merits of the application with a selection of our lenders, we managed to obtain an agreement in principle with a fixed interest rate of interest for 3 years at 10.9% with no early repayment charges.

 

This enabled the client to raise funds within 3 weeks, achieve a substantially reduced monthly payment through settling numerous high interest rate credit cards.  The product carries no ERC penalties which gives the opportunity to remortgage as soon as the first charge mortgage rate expires.

 

This case study shows how second charge mortgages can be utilised when clients are tied into their main mortgage & are unable to borrow further funds in order to reduce their monthly outgoings. We welcome any of our broker partners to contact us to discuss such applications.

 

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