The ‘race for space’ that we saw during the Covid-19 pandemic has subsided and in recent months the market has seen a slowing.
With housing stock levels and choice being at an all-time low, it has led to many prospective landlord buyers to stay put. Instead opting for how their imaginations can better serve improving their existing properties.
From knocking down walls for more open plan living; converting the attic into a home office; or the building of extra space for growing family needs – home improvement options are seemingly endless.
If a landlord is currently enjoying a low interest fixed rate, the last thing they wish to do is disturb it in the current economic climate.
The question is then, how best to fund such endeavours?
It has resulted in increasing numbers of landlords raising capital through the release of equity in their property portfolio.
Second charges – what are they?
A second charge bridge is a secured loan that uses the equity in your home as collateral. Completely separate to the original mortgage, the funding option can be a useful way to access extra funds without having to remortgage. Therefore meaning the owner will effectively have two mortgages on the property.
The application process is therefore similar to other mortgages, but much quicker and done without the involvement of solicitors – unless a higher loan of around £100k is required.
A fast and flexible funding option
A second charge bridge can be used for myriad of things, herein lays its appeal. Most popularly, it can be used to raise funds for home improvements, in addition to being a handy debt consolidation tool. Being used for everything from paying divorce settlements, tax bills for the self-employed, and even raise capital for investment in a new property.
This is particularly useful for investors looking to raise cash to buy property and take advantage of lack of rental stock. Not only that, it’s a quick funding option, too. A well organised broker can expect a response from a lender in 48 hours, and cases can be completed in as little as two to three weeks.
It also allows greater flexibility, with people able to loan larger amounts than with a standard loan and allows borrowers to pay it off quicker without early repayment charges.
Things are some key things to consider:
- Your existing lender will need to give permission and some will charge fees.
- Be realistic on your property valuations when considering your loan amount, some lenders may carry out a valuation depending on loan size.
What a specialist can help with
If undertaking a second charge for the first time, it can pay to use a specialist. Specialist finance providers have full visibility of the market and products on offer, in addition to being well versed in the evidence requirements and removing obstacles in the path to completion.
Being both highly experienced when it comes to complex cases and meticulous in their preparation of applications.
They can also help argue your case, too. For example, if a client has a complex income or adverse credit history, a specialist can discuss the merits of your case with the lender on your behalf.
In short, having an additional expert acting as a driving force for completion can be a blessing for time-pressed brokers.
Jason Berry is group sales & marketing director at Crystal Specialist Finance