Second charge loans can be secured against UK residential and buy-to-let properties. At Y3S Loans, 80% of the second charge loans we arrange are secured against private residential property. The remaining 20% are secured against buy to let properties. Depending on the property, there are myriad reasons why a second charge loan can be more suitable than a remortgage.
Example One: Residential loan for home improvements
Clients in Somerset wanted to move to a larger property as they were pregnant with twins and needed more floor space and bedrooms. They currently live in a much-loved two-bedroom cottage, albeit an old one, with fairly large rooms. They were unable to find anything of a similar size and character locally and within their budget, so they decided to extend.
They needed to raise £50,000 but were unwilling to remortgage away from an interest-only arrangement, which send their new payments skyhigh. Their broker sent them to Y3S. We organised a loan for the full amount over the same term as their mortgage saving them £124 per month. They extended their property adding an additional bedroom with ensuite bathroom and a playroom.
Example Two: Residential loan for business purposes
Our client owned a chain of carpet shops but was forced to shut down all but one during the financial crisis. They remained solvent with an excellent credit rating. With business accelerating once again, they saw a chance to expand in late 2015. They found suitable premises, but both Lloyds and HSBC refused to help him with the finances they needed for the acquisition. As the window of opportunity was closing, their broker from Bromley approached us for help. We arranged a £120,000 second charge loan at 66% LTV on their residential property which allowed them to purchase the premises and open a second shop.
Example Three: Residential loan for property purchase
A broker introduced to us a client who has a house in Fulham valued at £5m with a mortgage balance of £1.5m at 0.99% with the Woolwich. He pays this on an interest-only basis. He wished to raise £900,000 order to purchase a foreign holiday property. It made no sense to remortgage away from the superb mortgage deal already in place. In addition to this, by raising a second charge loan on his London property this meant that there was no need to put down a 25% deposit of £225,000 on his foreign purchase if he were to take out a first charge mortgage. The combination of the payment on his first mortgage plus the new second charge loan was many thousands of pounds per month cheaper than the lowest cost complete remortgage.
Example Four: Buy to Let loan for home improvements
A client who owns a small portfolio of buy-to-let properties wanted to bring them up to a modern standard and to generate increased rental income. She had not refinanced the properties in many years and benefited from a very low interest only payment on each of them. To avoid remortgaging to a higher rate, her broker introduced her to Y3S. We raised £25,000 on each property at £163.07 per month. This allowed her to renovate the properties: replacing the windows and doors, upgrade the boilers and heating systems and install new kitchens and bathrooms throughout. This immediately increased the rental income and overall market value in excess of the additional funds borrowed.