It is important that we consider how clients with existing mortgages raise further capital on their existing properties.
Current mortgage legislation requires mortgage intermediary firms like ours to confirm that when increasing borrowing, it has been considered whether it may be possible, and more appropriate, to obtain a further advance from an existing lender or whether an unsecured loan, second charge or re-mortgage is more appropriate.
Therefore, it is important that we consider how clients with existing mortgages raise further capital on their existing properties. Uses for additional borrowing range from home improvements to providing deposits for investment properties. Where we feel it is the most suitable solution, we can help our clients arrange further advances with their existing lender. Sometimes, we charge a fee for this, where the lender does not pay us for that work.
The definition of a mortgage is a first charge on a property.
Secured loans are useful and become appropriate in situations where borrowers may have had changed circumstances since the original mortgage was taken out. This might include changes in employment status, significant changes to income levels, changes of income sources, significant changes to credit history or a shift in the lending criteria of their existing lender.
Typically, secured lenders charge higher interest rates on secured loans as the secured lender always ranks behind a mortgage lender in priority should a borrower go into arrears or be repossessed, and therefore, their risk is greater.
Sometimes, secured loans can make it difficult for borrowers to remortgage to a new lender to obtain new mortgage terms and conditions once their existing terms and conditions have expired.
This is because the secured loan lender has to agree to ‘step aside’ to allow the new mortgage lender to have the first charge on the property by agreeing to a Deed of Postponement.
Our Adviser has arranged a significant number of secured loans for clients over the years and has the necessary expertise to research the secured loans market for clients where a secured loan is deemed to be the appropriate solution to our clients’ borrowing needs.