This has coincided with an increase in demand for second charge mortgages among both professional landlords and residential borrowers seeking to leverage their existing securities and use the money raised for a deposit on a holiday home or to add another property to their portfolio.

In particular, Norton Broker Services has seen heightened demand for second charge mortgages among buy-to-let (BTL) landlords who have been maximising opportunities to purchase additional property in a slow-moving market.

Similarly, a growing number of residential borrowers have also been taking out a second charge mortgage to purchase a holiday home, caravan, boat or motorhome, with some also seeking to rent out these properties when they are not being used for personal use.

This upward trend for second charge loans among residential borrowers has been driven primarily by a lull in the asset finance market, which has spurred growth in the second charge mortgage sector as borrowers seek an alternative way to raise capital.

 

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Second charge for BTL can be a ‘useful tool’

Using a second charge mortgage to raise funds to purchase a BTL property can prove to be a useful tool for many BTL investors or small-scale landlords, particularly as a second charge mortgage can offer longer terms, lower rates and have a higher acceptability rate on products.

One of the many advantages of a second charge, for example, is the speed at which the funds can be released, making them a suitable option for borrowers such as professional landlords who may need to move quickly on a purchase, such as buying a property below market value or at auction.

In many second charge mortgage cases, there is also often no need for a physical valuation, which also helps to speed up the application process considerably. Instead, automated valuations can be used to determine property value, which then enables the borrower to move quickly by leveraging their current portfolio and using the funds to purchase an onward investment.

Similarly, as most second charge applications are dealt with directly by brokers, no solicitor is needed to carry out any legal and conveyancing work, which helps to streamline the process even further.

Another advantage in taking out a second charge mortgage is that the capital raised can be used to purchase a property and bring it up to scratch, particularly if it is in need of repairs or general updating before a tenant moves in.

This can enable the borrower to improve the property’s market value, which can help to increase yields. Once the work is done, the borrower can then have the property revalued before switching to a BTL mortgage when the property is ready to be rented out.

While many BTL landlords will be adept at navigating the second charge market, the growing demand for holiday homes or second properties that could potentially be rented out from residential borrowers presents an opportunity for brokers to explore second charge mortgages with their clients.

Admittedly, this area of the market may prove to be unfamiliar territory for many residential mortgage brokers, which is where the help of a specialist mortgage distributor like Norton Broker Services can come into its own.

With 50 years’ experience in the specialist lending market, Norton Broker Services has the knowledge and experience to guide brokers and their clients through the second charge mortgage process.

This leaves brokers with more time to focus on the other areas of the business with which they feel comfortable, safe in the knowledge that the needs of the clients they refer are being adequately addressed.