The is growing demand for second charges on buy-to-let property and, with an equitable charge, landlords can access funding even where their first charge lender declines consent to a traditional second charge loan.
An increasing number of landlords are choosing to raise capital with a second charge on a buy-to-let property and we have access to a growing range of options for clients, even where the first charge lender declines consent on traditional second charges.
The three most common reasons for a second charge on a buy-to-let that we encounter are to release equity to grow a portfolio, make improvements to the buy-to-let property and to fund improvements on the client’s own home. A lot of landlords use their investment property to fund improvements on their own home as they can cover the cost of the extra borrowing with rental income.
We also work with a lot of landlords who have really attractive lifetime tracker rates with lenders like Mortgage Express that are no longer lending and do not give consent to another charge on the property. Ordinarily this would limit a landlord’s ability to raise capital on the property without remortgaging and losing their attractive rate, but we now have access to increasingly competitive loans where the second charge is registered as an equitable charge, rather than a legal charge. This means the lender does not take a legal stake in the property but instead is given the right for a judicial process of recovery and an equitable charge can be used where the first charge lender declines consent to a second charge.
Equitable charge loans are available up to £50,000 and can prove more economical for landlords than releasing equity by remortgaging the entire balance onto a more expensive rate.
FIND OUT what to do when the first charge lender declines to consent to a second charge