Making the most of second charge opportunities in buy to let – Steve Walker

We’ve seen countless examples of cases where mainstream lending hasn’t been able to provide a solution and second charge buy to let has saved the day.

One client, for example, was living and working in Australia with a buy-to-let property in this country but no credit history in the UK. The mortgage was interest only and the client wanted to raise funds to purchase another property in Australia. The mortgage brokers couldn’t arrange another interest-only mortgage but we were able to complete an interest-only second charge relying solely on the rental income for affordability.

In another case, we had a client looking to increase his buy-to-let portfolio but had no deposit so needed to take some equity out of the buy-to-let properties. However he was tied into the existing mortgages with high ERCs. He was able to raise the deposit by second charges on multiple buy-to-let properties which allowed the introducing broker to arrange the buy-to-let mortgages.

These examples are just two of many that demonstrate the flexibility around a number of factors, from property type and construction to client age and income type that second charge buy to let affords borrowers.

However, this is about to change.

In January the first ream of new rules from the Prudential Regulation Authority will come into play. These new regulations will make it more difficult to place buy to let cases with stricter stress testing and tighter criteria. Indeed, some lenders are already tightening the screws in readiness.

Brokers should be contacting any buy-to-let clients looking to make an application now to prompt them to act quickly. The flexibility on offer via second charge buy to let won’t be around forever, make the most of it while you can.