Secured Loans Explained

Learn all about second charge mortgages.

Second charge mortgages – also known as secured loans – were once seen as a last resort. Today, however, with rates close to traditional mortgage rates, no early redemption charges, fixed rates, and loan-to-value rates (LTVs) of up to 95%, second charge mortgages are an attractive option. There are many scenarios when a second charge will be a profitable alternative for raising capital – seconds can also offer a welcome haven from some of the restrictions on the first charge market.

Why use a Secured Loan?

The increasing focus on the mortgage market and restrictions on lending have made the option of a secured loan even more favourable for clients who need to capital raise. Secured loans can be used for virtually any legal purpose, and are generally quicker to complete than a remortgage. A secured loan can also enable clients to borrow money – particularly helpful if you do not wish to disturb your current mortgage arrangements.

Loan sizes are available from £10,000 right up to £2,500,000, and with loan terms of up to 25 years, a secured loan is often a credible alternative to a remortgage. Secured loans have the added attraction of no upfront costs and there is no requirement for a solicitor to be involved in the transaction.

Secured loans, What is available?

• LTVs up to 95% for employed applicants
• LTVs up to 95% for self-employed applicants
• Loan sizes from £10,000 to £2,500,000
• Rates from as low as 4.95%
• Buy-to-let second charges available up to 75% LTV
• Range of non-conforming products for clients who have poor credit or may need to access credit repair products.
• Loans available for borrowers looking to exit a debt management plan
• Relaxed proof of income for self-employed borrowers
• Maximum redemption penalties of 2 months’ interest
• Loan purpose – secured loans cover most legal purposes, including business and repayment of tax bills among others

Who are secured loans available to?

• Employed or self-employed homeowners who have an existing mortgage
• Landlords of rental properties – many of our lenders base affordability on rental income without further proof of income
• Borrowers who do not wish to upset their existing mortgage repayments – such as those with interest-only mortgages or low variable rate mortgages
• Interest-only borrowers who, because of limitations on further advance options (e.g. loan size or LTV), would be forced onto a capital and interest mortgage
• Borrowers who, for reasons of affordability, may have had debt consolidation applications declined (especially if the debt being consolidated is still being built into the income assessment)
• Self-employed applicants – all our lenders will accept accountant’s certificates to confirm income. In some circumstances, we can also work from bank statements
• Clients with early repayment charges (ERCs), who may need to capital raise without disturbing their existing mortgage
• Clients whose ability to capital raise is affected by lender income multiples
• Clients with missed or late payments on unsecured credit
• Clients in a debt management plan, or those looking to repay an individual voluntary agreement (IVA) or a bankruptcy.

Historically second charge mortgages, sometimes known as Secured Loans, were often seen as a last chance option. The rates were much higher and carried hefty early repayment charges. Fixed rates and Loan to values up to 95% – second charge mortgages are often a very attractive option.

There are many scenarios when a second charge may be a beneficial alternative when looking at capital raising – seconds can also offer a welcomed haven against some of the restrictions on the first charge market.