Our job is still to offer best advice at all times! Due to new regulations in the financial services market (MCD in effect March 2016), firms who wish to maintain their “independent advice” status on secured lending (ie mortgages) now have to consider second charge lending as a potential alternative to a remortgage when as client wishes to raise money. Vice versa advisers can not only offer a remortgage when a second charge would be more appropriate.
At Simple Financial Planning we have always believed that this should be the case in terms of treating customers fairly, and as such we have been offering both first charge (mortgage) and second charge (previously know as secured loan) for a long period of time prior to the announcement surrounding MCD. While the vast majority of our competitors only offer one or the other they are now (in their eyes) being forced to offer both – meaning their niche in the market is no longer applicable and they have to venture into new unfamiliar territory. We have been offering impartial advice across both parts of the market for a number of years and as such are very experienced in both – The management team have been intrinsically linked with mortgages and secured loans for well over a decade and have witnessed and been part of the ups and downs on secured lending roller coaster.
The fact of the matter is for some people a remortgage is not the best option – be it that they currently have a low rate mortgage ( ie base rate tracker), tie in/Early Redemption Charges (ERC’s) on current mortgage, change in circumstances like job/income or affordability – Mortgage Market Review (MMR) changes have meant much tighter affordability checks on mortgages, credit score pass levels have become more difficult to attain for some mortgage as well. They may just want to keep the term of the loan different to the current mortgage term.
Second charge lending is more flexible in terms of the common sense approach that is very much lacking in the mortgage industry currently. The mortgage market (or at least the vast majority of it) mainly relies on a very strict black or white, pass or fail model that is computer driven. The old “human eye” approach is long gone and a “no” very much means a “no” with very few options to appeal the decision or have it overturned. On the contrary the second charge market embraces the non-standard or slightly more complex cases often with positive results.
Our objective is to have clients debt and mortgage free as quickly as possible, if the remortgage is the best option but currently unattainable we will work towards that solution in a step by process, building up to the ultimate goal of a remortgage by address why it isn’t an option now – repairing credit rating with the loan while reducing outgoing until a remortgage is an option.
To recap reason why a second charge might be more appropriate than unsecured or a remortgage:
- Failed credit score on with original product
- Income and Expenditure prohibits the borrowing on either Remortgage or Unsecured Loan
- Current mortgage has ERC – Possibly fixed rate or low rate
- Change in circumstances – Job may result in lower income or even reduce credit score
- Remortgage might not be applicable for debt consolidation to the required level
- May want the term of the loan to be different to that of current mortgage