Only last week we spoke with a client looking for a second mortgage to help consolidate his debt – his £90,000 of credit card debt – whilst having little income himself to help aid this process.
Through a combination of spousal income and a projection for his business which is currently in its first year of trading we should still be able to help.
This isn’t actually the case study, I’ll get to that next, but the point I am making is that the second charge market is open and embracing debt consolidation whereas the traditional first charge lenders may just blanket state that such people do not ‘meet the required credit profile.’
Anyway, the case study.
Paul and Sarah are what I call “classic Londoners “. Both professional and with a young child, a joint income in excess of £100k, a dribble of savings and a tiny flat purchased modestly but now worth more than a Scottish castle . Oh, and over £50,000 in personal loans and credit card debt. Throw in a parent about to enter the care system and we soon have upon us an apocalyptic, middle class nightmare.
They asked for help. The fly, actually, make that flies, in the ointment were numerous. They were only half way through a fixed rate with redemption penalties lurking beneath. They had a fairly sizeable chunk on interest only with no repayment vehicle other than sale of the property or death of a rich aunt. For good luck let’s throw in Paul’s age which was creeping toward retirement.
We did what any good broker would do – we told them to speak with their existing lender. We felt a further advance should do the job and avoid paying the redemption penalties. So confident in fact were we that we didn’t expect to hear from them again. But we did. Ten weeks later Sarah rang to say that after an initial yes and the long drawn out protracted agony of dealing with bank advisers they were told that, in fact, no they wouldn’t help them as existing customers. Good job then that we viewed them as clients.
So we dropped what we were doing and gave them priority as now their situation was acute and time was of the essence. Within hours we had the solution – a second charge mortgage. Enough to clear all their debt with £20k left over as a savings buffer. From call to cash took less than three weeks. Soon after they were over £1200pcm better off and in a much better place all round.
I caught up with them recently for my favourite part of the job – a coffee and a gossip. They couldn’t speak highly enough for how the second charge loan had ‘saved them.’ Their words not mine. The book end to the story is that Paul recently retired form his wonderful final salary scheme and the generous tax free lump sum has repaid that second charge because, unlike their main residence, it carried no penalties.
Happy clients, happy broker but unhappy credit card providers. I think we can all live with that.
Martin Stewart is a director of IFA firm London Money