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Second Charge Loans
At Precise Mortgages we offer a diverse range of products available for you to purchase your property, refinance an existing mortgage or raise additional funds.
We have different products depending on whether we will have a first or second charge over your property. Whilst your chosen financial adviser will be able to tell you more about the products that we offer, hosted below is further information that helps to explain a little more about our second charge loan products.
The second charge loans products that we offer
We offer both buy to let and residential products for second charge loans.
Residential second charge loans
A residential second charge loan maybe something that you wish to consider if you are looking to:
- Carry out home improvements
- Consolidate existing finances
- Repay tax bills
- Find a loan suitable for any purpose
Buy to let second charge loans
Buy to let second charge loans are not regulated by the Financial Conduct Authority (FCA) and will be unregulated unless they are ‘consumer buy to let’.
A buy to let second charge loan will not normally be classed as ‘consumer buy to let’ unless you only have one property and didn’t purchase that property to let, for example, you inherited the property or originally purchased it to live in. ‘Consumer buy to let’ are subject to the requirements of the Mortgage Credit Directive Order, (the Order) which is supervised by the FCA.
If you have a buy to let second charge loan that is not classed as ‘consumer buy to let’, we will include an offer condition in the mortgage offer explaining that as the agreement is fully or predominantly for the purpose of a business carried on or intended to be carried on by you, you will not have the benefit of the protection and remedies available under the Order. You agree to this by signing the mortgage deed.
The key difference between the second charge products that we offer is essentially the initial product fees we charge and the rate of interest that is payable on the amount you have borrowed. Alternative product options for both buy to let and residential second charge loans include:
- A fixed and then variable interest rate – the interest rate will be fixed for an initial period and then a variable rate tracking the Bank of England Base Rate(BBR).
- A variable rate – the interest rate will be a variable rate tracking BBR. The margin above BBR may be the same for the whole term of the mortgage or change after an initial period.
A repayment mortgage of £35,000, payable over 10 years initially on a tracker rate for 2 years at 3.70% above the Bank of England Base Rate giving a current rate payable of 3.95% (variable) and then on a tracker rate for the remaining 8 years at 3.85% above the Bank of England Base Rate giving a current rate payable of 4.10% (variable) would require 24 monthly payments of £397.57 and 96 monthly payments of £399.85.
The total amount payable would be £48,046.98 made up of the loan amount plus interest £43,566.98, a product fee £300.00, broker fee £4,025.00, a funds transfer fee of £35, and a redemption admin fee of £120.
The overall cost for comparison is 6.8% APRC representative.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
- What is BBR and how do our products track this?
The Bank of England Base Rate is the rate of interest that the Bank of England pays on reserve balances held by commercial banks and building societies. It is set by the Bank of England’s Monetary Policy Committee. For more information and details of the rate currently and historically please click http://www.bankofengland.co.uk/Pages/home.aspx.
Where the rate of interest we charge is variable it will be set as a margin above the Bank of England Base Rate. Whenever the Bank of England Base Rate changes we will re-calculate the rate of interest you pay by taking the Bank of England Base Rate and adding the margin to it. The margin we add (which may change during the Mortgage Term depending on the product you choose) will be set out in Section 4 of your Mortgage Offer.
Your monthly payment will change from the second due date after the change in the rate of interest takes effect (or where the due date falls on the same day that a change in the rate of interest takes effect, the first due date after the change).
All of our BBR tracker products have a floor. This means that if BBR were to fall to 0.00% or less the rate payable will be 0.00% plus the agreed set percentage above BBR. This means that the rate payable will never go below 0.00% plus the additional percentage rate of the tracker product.
If the Bank of England Base changed on the 14th of January then the rate of interest you pay would change on the 14th January. The date your monthly payment changes to reflect the change in the rate of interest depends on when you make your monthly payments, for example:
- if you paid your monthly payment on the 10th of each month then your monthly payment would change on 10th March.
- if you paid your monthly payment on the 20th of each month then your monthly payment would change on 20th February.
- if you paid your monthly payments on the 14th of each month then your monthly payment would change on the 14th February.
The mortgage illustration that your financial adviser will give you will illustrate how an increase in the rate of interest will affect your monthly payment.
- Early repayment charges
If you repay all or part of your loan early you may need to pay an early repayment charge. Details of any early repayment charges will be set out in the mortgage illustration and mortgage offer. The early repayment charge will be a percentage of the amount repaid and the mortgage illustration and mortgage offer will explain the amount of that percentage, the period it is payable for and give an example of how much would be payable on the amount repaid.
- Repaying your mortgage
Both our buy to let and residential second charge loans are for a minimum of 3 years and maximum of 30 years.
Repayment option - available for buy to let and residential second charge loans
If you have chosen the repayment option, you pay off some of the amount borrowed every month together with a payment of interest charged on your loan. This means that your loan balance will reduce every month and by the end of the loan term it will be repaid.
Interest only option - buy to let loan second charge loans only
If your loan is interest only, your monthly payment only covers a payment of interest charged on the loan. At the end of your loan, you will still owe the amount that you borrowed, and will need to repay this as a lump sum. It is important that you have a separate savings plan in place to repay the amount borrowed on an interest only basis at the end of the loan term. You should check regularly throughout the loan term that the performance of your savings plan is sufficient to be able to repay the amount you have borrowed at the end of the loan term.
If you don’t keep to the terms of the mortgage or make payments on a date other than the payment date then if:
- You have chosen the repayment option there is likely to be a balance outstanding at the end of the loan term that you will need to pay as a lump sum payment, or
- If you have chosen the interest only option the amount you have to repay at the end of the loan term is likely to be more than you originally borrowed.
Remember, if you are concerned that you will be unable to meet your mortgage repayments now or in the near future, please ensure you call us as soon as possible on 0800 781 8558.
- What fees and charges you may be required to pay
We’ve created a booklet, called ‘Tariff of mortgage charges’ that provides details of our fees and charges that may be payable in connection with your loan. You can see this booklet here. The fees quoted as payable before your first monthly payment in that booklet relate to our first charge mortgages, You should ask your broker what fees are payable before the first monthly payment on your second charge loan, these fees will also be included in Section 4 of the Mortgage illustration and Mortgage Offer.
It is important to remember that your adviser may charge you for advising you on your second charge loan. Please ensure that you check this with them and confirm what their charges will be.
Should you wish to, you are able to make lump sum or regular overpayments on your mortgage. If you choose to do this an early repayment charge may apply if this payment is made within the period that early repayment charges are applicable.
If you do wish to make an early repayment, you will need to confirm the following to us:
- If you are making a payment to repay the mortgage either fully or partially
- That you wish us to use that payment to reduce the balance on which we charge interest.
If the above information is not received, the overpayments will not reduce the balance on which we charge interest or cause a change to your monthly payment.
- Your property
We will require a legal charge over your property. This will be a second legal charge ranking behind the current first mortgage.
We are able to lend on properties in England and Wales, subject to certain restrictions on the types of properties that we will lend on. Please note we are unable to lend in Scotland. Your financial advisor will be able to provide you with further information on these restrictions.
To help us confirm whether properties are adequate security for the mortgage, we will either arrange for a physical property valuation to be carried out or will use a valuation model to assess the current value of your property rather than carrying out a full inspection of it. Your broker will tell you which method we are using.
Where we require a physical inspection the valuation must be provided from a valuer on our panel of approved independent surveyors and valuers. If you are responsible for paying the costs of the valuation you will have been told this in Section 4 the Mortgage Illustration and the cost will be included in Section 4 of the Mortgage Offer.
Please note, the valuer is not our agent for the purposes of any valuation or report and we accept no responsibility for the contents of any valuation or report.
- Foreign currency mortgages
We will not be able to lend to you unless you are resident in the UK and our assessment of your ability to repay the mortgage will only be on income you receive in £’s sterling and assets you hold in £’s Sterling.
- Building insurance
As a condition of your mortgage, you must ensure that adequate insurance to cover loss and damage to the property is maintained throughout the mortgage term. You do not need to buy this insurance through Precise Mortgages.
- Payment protection and life insurance
Your mortgage payments are not automatically protected in the event of accident, sickness or unemployment. In view of this, you may wish to consider protecting yourself and your family against the potential loss of your income. If a situation arises where you are unable to work and as such struggle to meet your mortgage repayments, this could lead to the risk of you losing your home. Whilst we appreciate that it is a sensitive topic, you may also wish to consider life insurance to help ensure mortgage repayments in the event of your death.
Your financial adviser may be able to help you arrange payment protection or life insurance but it is not a condition of your mortgage that you have these policies. Please note that we are unable to advise you on the suitability of any arrangements that you may make, whether privately or through your financial adviser.
- What happens if you don’t make your monthly payments
If you experience difficulty meeting your mortgage payments you can contact us by:
- Writing to us at PO Box 6075 Wolverhampton WV10 6TD
- Calling us on 0800 781 8558
We have a team of experienced staff available to provide you with information and support. You can also find useful information on the Money Advice Service website at moneyadviceservice.org.uk or by calling 0300 500 5000. Please click here for further information.
- If you breach the terms of your mortgage
Where you do not make your monthly payments or breach the terms of your mortgage in any way:
- There may be additional costs for you where we have to carry out further work. Information regarding our fees and charges, and our right to change them can be found in our 'Tariff of mortgage charges' and the 'General Mortgage Conditions' – please click here.
- Additionally, you will have to pay any costs we pay for insurance and to third parties (e.g. solicitors, asset managers, receivers) that we may instruct to recover any money owed to us or protect our interest in the property.
- We may also pay, on your behalf, any costs and charges associated with the property where you have failed to, and we reasonably consider it necessary to do so to protect our interest in the property. We will add these costs and charges to the amount you owe and which you have to repay to us.
- If you fail to make your monthly payments then this information will be passed to credit reference agencies, which may impact on your ability to take out further loans.
- As a last resort, your property may be repossessed if you do not keep up with payments.
- If you hold a buy to let second charge loan, we may also appoint a ‘receiver’ to collect rent, manage and potentially sell the property. The receiver acts as your agent and therefore we are not legally responsible for their actions.
Precise Mortgages is a member of the Finance and Leasing Association (FLA) and follows the FLA Lending Code which applies to loans secured by a second mortgage on your home. Copies of the FLA Lending Code are available from Precise Mortgages, 2 Charter Court, Broadlands, Wolverhampton WV10 6TD or visit the Finance & Leasing Association website at http://www.fla.org.uk/.