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Second charge mortgage lenders are helping more homeowners with credit cards and loans to consolidate their debts and lower their monthly costs.   

The largest lenders in the second charge market like UTB, Paragon, and Shawbrook offer the most competitively priced rates starting from 3.8% and they have products without early repayment charges. 

Trinity Finacial's brokers tend to recommend second charges to borrowers who want to lower their costs when they have high-interest rates on their credit cards and loans, but they also have high early repayment charges on their mortgage. They also can't remortgage to consolidate their debt because they do not meed the lender's affordability criteria.

Aaron Strutt, product director at Trinity Financial, says: “When someone calls and asks about debt consolidation, we would always try to place them with a standard lender offering low rates, but they don't always qualify.  

“If they are tied into their fixed rate which is going to cost them thousands to get out of, and the interest rates on their credit cards and loans are excessive, we let them know about second charges.”   

Some of the second charge lenders will provide income stretches and higher loan-to-values and they can also help borrowers with missed payments. 

Call Trinity Financial on 020 7016 0790 to secure a first or send charge mortgage or book a consultation


What is the point of a second charge loan?

Second charges are designed to help people reduce their monthly costs when they have expensive debts on high-interest rates. They are not typically for borrowers on 0% credit cards or in a position to access debt consolidation mortgages and the cheapest rates.  

With the representative rates at approximately 20% on many credit cards and so many borrowers with significant amounts of unsecured debt, it is not surprising credit card repayments can be hard to manage. 

Second charges allow often allow borrowers to significantly reduce their monthly outgoings by consolidating their debts. 

What are the dangers of a second charge? 

While second charge mortgages are an attractive option for many borrowers often struggling to make their monthly repayments, there is a danger that borrowers will refinance and then run up debt again in their credit cards and loans. 

Many of the banks and building societies have tightened their mortgage acceptance criteria so they will not lend if borrowers have completed debt consolidation remortgages in recent years. 

How long does it take to for a second charge to complete? 

Once a mortgage broker like Trinity Financial has assessed your overall financial situation to ensure that you do not meet the affordability requirements of the biggest providers offering the most competitively priced rates, we will refer to a specialist second charge broker. They will work out which lender has the most competitively priced rates and arrangement fees.

Second charges can be agreed swiftly with the money in your account within weeks. 

What are the second charge rate options? 

Second charge lenders like UTB provide two, three and five-year fixes and lifetime Bank of England tracker rates.  The cheapest rates are priced around 4% and they are available to borrowers without missed repayments or CCJ’s.  

Rates can get much more expensive for borrowers with missed repayments and CCJ’s and they can be as high as 10%. 

What are the setup fees for a second charge?  

Many of the lenders charge 0.5% arrangement fees with minimum amounts depending on the product and the size of the loan. The broker will also charge an arrangement fee. 

Do second charges have early repayment charges? 

Many of the second charge lenders provide borrowers with the option of taking a rate with or without early repayment charges. 

If you opt for a fixed-rate with exit fees, you are likely to pay a slightly lower rate. These products do not provide borrowers with the same level of flexibility as the no early repayment charge products and you want to make lump repayments to clear the debt before the end of the term they are not a good option. 

How do the lenders assess income and second charge afforability? 

Some of the bigger lenders require employed borrowers to have been in their role for six months or three months if they have 12-month continuous employment with no probation. 

They can accept 100% of all guaranteed income and even lend up to six-times salary, this includes basic pay, car allowances and shift allowances. They can also accept 50% of monthly regular income, such as bonuses, overtime and commission, although this must be evidenced by the last three payslips subject to 18-month history.  

Self-Employed applicants may well have the loan-to-value capped with the large second charge providers at 75% loan-to-value. Sole traders can often use 100% of their net profit, and partnerships or limited companies can use 100% of all sustainable drawings or dividends in addition to any salary.

Retained Profits and Directors Loans are not accepted. Applicants should be able to use 100% of pension or maintenance payments and 100% of regular income.

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