Keep your current mortgage and look at a secured second charge?

So you are looking to raise some funds for a home improvement exercise or maybe to purchase another property, yet your current mortgage is a on a superb, competitive rate and you really don't want to change it.  Your current lender has offered a further advance, but you want to explore other options.

That leads us to the secured second charge market, also known as secured loans.

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.

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, sometimes up to 95% of the property value.

The secured loan is normally repaid over a shorter term than a standard mortgage, usually 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, but can start as low as 4.95%.  

This market is predicted to grow dramatically in 2016 when a new EU Directive is implemented.  In short, when a customer wants to remortgage to raise additional funds, the intermediary / mortgage broker will need to demonstrate the best outcome for the customer. This means not only looking at a full remortgage on a first charge basis, but a comparison 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 to achieve and meet your needs and requirements!