Second charge to repay unsecured debts and fund home improvements

THE SCENARIO

The reduction of monthly payments is often a key motivation for clients looking to refinance debts. My clients on this case were looking to repay unsecured debts of £100,000 to reduce their monthly outgoings. They then hoped to borrow a further £30,000 to pay for some home improvements. My clients had approached their current mortgage lender to no success.

The repayment of the unsecured debts was proving very expensive for my clients, so it was critical this was repackaged more efficiently; as it stood, they were paying £2600 a month solely to repay this debt. My clients also had large and regular financial commitments in the form of their childrens’ school fees; with three children, all in private education, they were paying almost £50,000 in fees per annum.

Their property was a five-bed detached home in Surrey, valued at £2million. They currently had a mortgage of £1,220,000 at a low interest rate, on an interest-only repayment basis. My clients did not wish to lose this rate, but they were extremely keen to lower the interest rate on their unsecured debts.

OUR SOLUTION

I knew we would therefore need to approach second charge lenders, as they did not wish to remortgage from their current first charge rate. My clients planned to sell the property in the next 10 years when their children had left home, and would use this as an exit strategy for repaying the loan. The husband received an annual bonus payment which can vary, which my clients generally used to manage the payment of the school fees.

Lenders can be reticent about using the sale of a residential property as an exit strategy, and likewise may not want to take bonus income into consideration. Fortunately, I have a good relationship with a lender who was willing to take a holistic view of my client’s situation. This lender also takes a manual underwriting approach when assessing monthly outgoings, and carefully considers the actual affordability of the client on a case-by-case basis.

This lender was able to offer the second charge at a lifetime variable rate of 6.65%, enabling my clients to achieve their aims. Ultimately, this reduced my clients’ monthly payments significantly, and provided the £30,000 for home improvements.

This was an excellent resolution for my clients and proof of how I can confidently deal with challenging cases. If you are looking to borrow money against your property, please don’t hesitate to get in touch for a further discussion of how I could help you.

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