I recently secured a second charge mortgage for a couple who are existing clients. I had previously helped them purchase their family home approximately a year ago, where they live with their three children. They were now looking to carry out some home improvements in order to increase its value and make their everyday living more enjoyable.
As my clients were only one year into their mortgage, they were unable to take out a further advance with their current lender because the loan to value (LTV) with the additional borrowing was deemed too high. They would also have had to pay a large redemption penalty if they were to remortgage to another lender and increase the borrowing.
The property is located in South West London and valued at £1.1million. The mortgage with the first charge lender is £750,000 and the clients needed to do £150,000 worth of home improvements.
This took the LTV to 81% which was too high for the first charge lender to consider.
Thanks to our relationship with such a wide network of lenders, I managed to find a way for the clients to borrow the additional £150,000 without them having to remortgage their first charge mortgage and pay the large early redemption penalties.
This was in the form of a second charge mortgage. The second charge lender was able to lend the couple the full £150,000 and take into consideration the property will have in increased value once the home improvements were carried out.
The second charge lender was also able to provide a loan without any early redemption charges therefore as soon as the clients fixed rate product on their first charge mortgage ends, they can consolidate the first charge mortgage and the second charge into one mortgage. This will be simple to then remortgage with a high street lender as the property will have increased in value, therefore the LTV won’t be so high.