I'm finding it a really good time to be in mortgages! Rates are low, customers need professional assistance more than they ever have done and competition in the market is at it's highest for some years. This is across all areas of the market place from Residential Mortgages to Buy to Let, and Bridging Loans to Secured Loans.
In fact, the latter has seen a large increase in demand. A secured loan is a 2nd, or subsequent charge, designed for homeowners and which allows the equity in their property to be used as security. Loans usually start from £3.5k and now range right up to £2.5m! There are also no 'up-front' fees to find although costs for valuations and legals (for example) are added to the advance.
We tend to find that many customers looking to remortgage to raise additional funds are already on an attractive rate with their lender. To move away could be costly and they could end up on a much higher interest rate. Depending on the amount already lent as a mortgage, compared to the value of the property, most lenders will allow a secured loan to be added as additional borrowing, right up to 95% of the property value.
The secured loan is usually repaid over a shorter term than a mortgage, circa 3-7 years, but the term can be longer and up to 25 years, although this will increase the amount of interest repaid. Rates vary depending on the customer’s circumstances and current level of borrowings.
This market is also predicted to grow in 2016 when a new EU Directive is implemented. In short, when a customer wants to remortgage to raise additional funds, the intermediary/broker will need to demonstrate the best outcome for the customer and not only look at a full remortgage on a first charge basis, but compare with an appropriate secured second charge loan allowing the customer to keep the existing mortgage or a further advance with the existing funder. Although the Directive is still a way off, the FCA principles already apply to firms and individuals so best outcomes and best practice for borrowers are at the forefront of any advice and recommendation. This demonstrates more than ever the need to seek professional advice!