Second charge rates cheaper than first charges?
Second charge rates cheaper?
We talk quite a lot about how second charge can be the more cost effective solutions for a number of borrowers. However, by this we usually mean taking into account all circumstances the overall cost of the loan is cheaper. What we’re starting to see now however is second charge rates actually falling lower than their comparable first charge rates.
Ignoring for a second the debate over whether second charge rates have fallen too far I’d like to issue a request to brokers. Not a challenge per se, but rather an experiment.
Taking the two scenarios below I’d like to see how brokers would tackle the case with a first charge product. I’d be genuinely interested to find out.
So. scenario one. A borrower has missed three mortgage payments 12 to 19 months ago and has been paying extra each month to bring the mortgage up to date, which he eventually did three months ago. He now needs to raise £50,000 in capital at 65% LTV with good affordability. The best second charge rate for this scenario is 3.83%. Could a first charge beat this?
Or how about this one – a borrower had a £4,500 CCJ in October 2016 and a £750 CCJ in January 2017. Both have now cleared and his equity levels and affordability are good. In this case the best second charge rate available is 3.9% – how does this compare with a first mortgage?
I think a lot more brokers would see the benefits of second charge products if they actually took the time to make the comparisons and do the figures. So if you think you can beat the rates above with a first charge please get in touch, if not, perhaps it’s time to start looking at what’s available in the second’s market for your clients?
01902 585052
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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