Raising capital quickly using a second charge loan
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.
As a landlord there are times when you may need to raise capital quickly, whether to take advantage of an financially attractive house sale, or to raise funds for repairs to current properties.
This can be a tricky challenge for many landlords, but there is a solution! The answer is not always to remortgage and we work with lenders who can help.
If you want to borrow more capital without affecting your current mortgage, or you are not outside of your initial rate period and thus would be subject to early repayment charges, a second charge loan may provide the solution you are looking for.
We work with a number of specialist second charge loan lenders, who will also provide a helping hand to those landlords who have a few minor blips on their credit profile, more on this below.
The benefits of a second charge loan
Raising capital from an existing mortgaged property requires you to remortgage to a new product and borrow more, which ties you to a potentially higher monthly repayment. Not so with a second charge loan. You can retain your existing low rate deal, which remains untouched, and instead take out further borrowing separately.
The main benefits of a second charge loan are:
- The application process is usually quicker than for a standard mortgage
- The criteria applied by lenders is usually more lenient
- A second charge loan allows you to keep your first charge (which can be particularly useful where you have a low rate or where refinancing would incur Early Repayment Charges)
- Raising capital from an existing mortgaged property requires you to remortgage to a new product and/or even a new lender. This can result in a lot of cost and a different rate.
Many buy to let lenders have changed their criteria to comply with Prudential Regulation Authority (PRA) changes; consequently, you may find yourself unable to remortgage because of the tighter affordability stresses placed on your background portfolio.
Some second charge loans are more flexible in the underwriting process, allowing you to raise the capital required despite the changes.
Second charge loans are available to a wide variety of landlords
A second charge loan can be secured both against standard buy to let properties and Houses of Multiple Occupation (HMOs). It is worth noting that, where the local council requires one, a valid HMO licence must be provided.
Second charge lenders also tend to be more flexible on the type and construction of the property on which they will lend.
Your credit profile
Some landlords may have a credit blip and find that a lot of other lenders have closed their doors to them. With second charge loans, the criteria can be more flexible around credit history. Call one of our experienced advisors today to see how we can help you.
A second charge loan solution for inexperienced landlords
Relatively new landlords in the early stages of a career in property investment often find themselves unable to raise capital due to their relatively limited time as a buy to let owner.
Second charge lenders will consider your circumstances, including your external income, the type of building construction on the property you own, your portfolio (if relevant), multi-unit properties and HMOs, with a degree more flexibility than traditional buy to let lenders will apply when reviewing an application.
Contact our specialist advisors discuss how a second charge loan can work for you.