Secured personal loans or second charge loans are being overlooked by brokers as an alternative to remortgaging, according to specialist broker Enhanced Wealth Limited
The latest figures from the Council of
Mortgage Lenders show remortgaging as 46% of total lending, but
warned:"There are a lot of potential clients who represent a good borrowing
risk but do not have enough equity to meet their needs through a
remortgage. Others
face early repayment charges, have credit problems or just do not want to
add to the size or term of their loan. That is where the second charge loan
comes in."
Sean Horton, director of broker Enhanced
Wealth Limited, commented: "A second charge loan or secured personal loan
can be a good option for clients with current redemption penalties. It is
also useful if a clients credit history has deteriorated since taking out
their main mortgage. In this scenario, remortgaging on an adverse credit
basis may cause the interest rate charged to be higher overall than if a
secured personal loan was used for just the additional funds.
However,
Secured personal loans or
second charge loans are by their nature more risky so the interest rate
charged will be higher than the main mortgage. Secured loans can be obtained
for up to 125% of the value of the home and can be used for almost any
purpose. The individual client's circumstances and repayment terms will
determine whether a second charge loan or refinancing is more appropriate.
We always recommend clients seek advice from an independent mortgage
broker”.
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