A first charge is essentially your first mortgage on a property; some clients however, request a second charge mortgage to sit behind the first charge in order to release further equity. For a second charge mortgage, you would normally need a specialist lender.
Key figures:
£2.25million property
£1.4million first charge
£150,000 second charge
70% loan to value (LTV)
8.99% fixed for 2 years
2 years early redemption charges
The client:
This gentleman was a former client of mine. He was a successful banker earning a high salary. However, he had built a substantial amount of debt, totalling around £125,000. This debt had accrued from paying for very expensive school and university fees for his children.
The property:
The property was a beautiful home in Kent valued at £2.25million.
What were they looking for?
He needed to consolidate his debt by using the remaining equity in the Kent property. He already had a first charge mortgage on the property at £1.4million. The first charge is currently fixed for two years, meaning that he faces early redemption charges.
He was looking for a loan of around £150,000 to bring the total loan to value to 70%, therefore raising enough capital to consolidate debts.
Why was it difficult?
Since my client had built up such a level of debt, this would make the interest rate he would likely be offered a lot higher. We needed to consolidate his debt to be able to show his affordability and reduce the expected interest rate.
What was the process?
I have an excellent relationship with a specialist lender in the UK. They are known for being able to offer the highest loan to value rate for second charge mortgages.
The solution:
We managed to secure a rate of 8.99% fixed for 2 years. This was an excellent deal for my client as it allowed him to avoid substantial extra charges and facilitated the consolidation of his debts.
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