I am sure there have been plenty of heavy hints dropped by compliance departments as well as industry pundits that there are more ways than one to provide funds to a homeowner wishing to raise capital.
Remortgages have in the past become the default ‘go to’ product to enable advisers to meet the needs of clients and in many cases that choice provided exactly what the client needed. As a potential customer for capital raising myself, I am sure that I would look very carefully at a remortgage if it suited my purposes. But I would also expect my adviser to give me all the options available and then explain how he or she arrived at a recommendation from the choices available that had included a further advance, remortgage or a secured loan (second charge loan).
Customers trust their advisers to recommend the right choice for them. However, there is a world of difference between just recommending from one product type, as opposed to laying out all of the choices so that a client can understand why a particular path was recommended.
Fluent for Advisers works with brokers to provide not only a whole of market second charge proposition to make use of, but also the facility to talk through cases with experienced professionals to see whether a client might be better served with a secured loan.
One of the most common misconceptions I come across, is that headline cost trump must every other consideration. With rates at an all time low and repayments spread over a typical long term mortgage period, it is hardly surprising that a second charge loan, looks on the face of it more expensive on a monthly basis than a remortgage.
However, have we considered whether a client really wants to spread his payments over a first charge mortgage period? Is it in the client’s interest to move their mortgage to another provider? Do the costs of exit and re-entry, from and to a new mortgage, make sense? Will the client have to move from an interest only to a capital + interest basis and if their credit profile has deteriorated, will the rate that was first presented still be available?
Just a few of the considerations when assessing the best route to take.
Customers not only deserve a straight recommendation but also to understand why other choices were discarded. Many advisers have been genuinely surprised at the number of times that a secured loan was more appropriate once the client’s circumstances and needs had been fully analysed.
Jeff Davidson is head of intermediaries at Fluent for Advisers