Expand your client’s portfolio with a second charge

For professional landlords looking to expand their property portfolio, a buy-to-let (BTL) second charge mortgage can prove to be an efficient and flexible funding solution for those looking to quickly raise capital to purchase another property.

Much faster than remortgaging with a more streamlined application process, a second charge mortgage is an ideal solution for landlords in urgent need of finance as the funds are typically released within three to four weeks, sometimes even within days.

Recently, both brokers and borrowers have started to become more aware of the benefits of second charge loans as a quick and flexible alternative to remortgaging, with the market experiencing a surge in popularity as delays in the mortgage process force many to seek alternative ways to raise funds.

Second charge loans have always proven popular with landlords and property investors however, as they allow landlords to access the finance they urgently need without compromising their existing mortgage terms.

This means they can retain the competitive first charge rate and preferential terms on their main mortgage loan as well as avoid paying any early repayment charges.

For example, landlords recently locked into a five-year fix but in need of more capital for another property purchase, can use a second charge to tap into the equity in their existing portfolio and use the loan for a deposit or outright purchase on an additional property.

This is particularly attractive in the current economic environment where the rising cost of living and escalating inflation are driving interest rates upwards and product offerings are also being withdrawn at a rapid rate.

Landlords will also benefit from the fact that house prices have grown substantially over the last few years, and many will find they have equity at their disposal that can be unlocked through a second charge.

Many lenders offer BTL second charge options, with interest rates similar to those of residential second charge loans and the products are flexible on both rental income and credit history.

As with all loans, each lender’s criteria differs, but generally, affordability is based on rental income and the amount of equity held in other property will also play a significant part.

Typically, all second charge lenders will calculate the loan to value from the combined total of the existing mortgage and the proposed second charge combined, with loan amounts starting from £3,000 upwards available to those aged up to 85 years old.

As most second charge applications are dealt with directly by brokers, no solicitor is needed to carry out any legal and conveyancing work, and with AVM valuations usually deemed sufficient, no physical valuation is required, which streamlines the process even further.

Brokers with BTL clients looking at ways to raise capital should ensure that second charge mortgages are presented as a viable option for addressing their needs.

Landlords looking to expand their property portfolio often have to move quickly, and the speed in which funds can be released makes second charge loans an attractive proposition for those looking for a cost-effective way to raise additional capital without jeopardising the terms of their first charge mortgage.

Jimmy Allen is broker account manager at Norton Broker Services

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