Second charge advice – what is it?
Second charge advice
Sometimes, even with the very best intentions it’s possible to get things wrong. Despite having the best will in the world to conform to FCA regulation and offer seconds via an advised process, there is a real chance that specialist loan brokers and mortgage brokers could fall short. I think this could be partly due to the difficulty in shrugging of the historic sales process and partly due to not fully grasping the message coming out from the FCA following the thematic review on advice.
Brokers in the second charge market have traditionally operated a non-advised model which largely entails finding out what the customer wants and delivering on that. The broker will ask the client questions such as ‘would you like a fixed or variable rate?’, ‘how much would you like to borrow’ and ‘what kind of term would you like?’ And would then source a product based on these findings. Mortgage brokers have often adopted this approach when using our loan packaging service.
The advised model, of course, works differently to this and the feedback from the FCA clearly suggests that the customer doesn’t really get a say in what type of product they’d prefer. Indeed, rather than asking the client about what they would like, the broker should ask the client questions which will reveal their financial circumstances and plans for the loan and by doing so should be able to deduce what type of product is most suitable.
By asking open questions brokers are able to gain a greater understanding of the client’s needs and as a result determine the most suitable option which could result in a different loan amount, term, product type or repayment method than a customer may have requested under the old sales process.
The shift to advised sales may be a bigger change than some advisers think, especially those new to giving advice. Forget tick box fact finds. What is clear is that the regulator expects you, as the expert, to use your experience and knowledge to ensure an appropriate recommendation is made – this, and not the consumer’s preferences, should be what guides you do the most suitable product.
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Promise Money is a broker not a lender. Therefore we offer lenders representing the whole of market for mortgages, secured loans, bridging finance, commercial mortgages and development finance. These loans are secured on property and subject to the borrowers status. We may receive commissions that will vary depending on the lender, product, or other permissable factors. The nature of any commission will be confirmed to you before you proceed.
More than 50% of borrowers receive offers better than our representative examples
The %APR rate you will be offered is dependent on your personal circumstances.
Mortgages and Remortgages
Representative example
Borrow £270,000 over 300 months at 7.1% APRC representative at a fixed rate of 4.79% for 60 months at £1,539.39 per month and thereafter 240 instalments of £2050.55 at 8.49% or the lender’s current variable rate at the time. The total charge for credit is £317,807.66 which includes £2,500 advice / processing fees and £125 application fee. Total repayable £587,807.66
Secured / Second Charge Loans
Representative example
Borrow £62,000 over 180 months at 9.9% APRC representative at a fixed rate of 7.85% for 60 months at £622.09 per month and thereafter 120 instalments of £667.54 at 9.49% or the lender’s current variable rate at the time. The total charge for credit is £55,730.20 which includes £2,660 advice / processing fees and £125 application fee. Total repayable £117,730.20
Unsecured Loans
Representative example
Annual Interest Rate (fixed) is 49.7% p.a. with a Representative 49.7% APR, based on borrowing £5,000 and repaying this over 36 monthly repayments. Monthly repayment is £243.57 with a total amount repayable of £8,768.52 which includes the total interest repayable of £3,768.52.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME
REPAYING YOUR DEBTS OVER A LONGER PERIOD CAN REDUCE YOUR PAYMENTS BUT COULD INCREASE THE TOTAL INTEREST YOU PAY. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
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Authorised and regulated by the Financial Conduct Authority – Number 681423The Financial Conduct Authority does not regulate some forms of commercial / buy-to-let mortgages
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