Prestige finance

Gareth43

Hello
I'm in the process of taking out a second charge loan with prestige finance for home improvements, I'm ok with the initial interest rate which is fixed for 5 years but after that it becomes variable and I am concerned they will be able to change it whenever they want. I plan on changing my current mortgage in 5 years when my partner goes back to work full time as we will then be able to afford to remortgage for the cost of our current balance and the £65,000 I am borrowing from prestige finance, this way I don't have the loan for 25 years with prestige and I am not at the mercy of their interest rates. I have bad credit so not a lot of options available to me. Any advice?

ACG

You have already said you plan to wrap the loan up into the Mortgage in 5 years, so you will not be at the mercy of any variation in the rate.

What are you looking for advice on?

Gareth43

If anyone had had dealings with the company and if wrapping up the loan in 5 years in to the remortgage is the right thing to do.

kingstreet

Make your plans assuming you won't be able to do what you want in five years.

In my experience, something else will go wrong and you'll end up unable to remortgage, or similar.

Gareth43

On that advise I would not be able to do the much need work to the house and in 5 years the roof would have collapsed and the walls would be crumbling costing me £100,000's rather than a few grand now

Richey_

£65,000 is not a few grand!!!

You are taking a risk, obviously. You need to weigh up if it is worth it, against the house value etc. Something to throw in, are you sure you will be able to get a re mortgage in 5 years time? They will assess your age, your income, your LTV etc. Have a backup plan, when this Brexit business hits there’s much unknown coming, be prepared to have a contingency plan in case house prices drop, affecting your LTV to be able to borrow more, be prepared in case interest rates go up - this will affect both your mortgage and your rate after 5 years. Also be prepared that the UK is likely to go into a recession again, although the government think this will not be as long as the last one. During the last recession, it was almost impossible to get a lot of lenders to lend mortgages. Also take advice as once the secured loan is on the property, if you changed mortgage suppliers would the secured loan become the first charge on the property? A lot of mortgage companies will not lend unless they are the first charge. You would need this loan company to agree to go back to being the second charge, which they may not be willing to do. This could trap you in to only using your current mortgage supplier until the secured loan is paid off and if they refuse the remortgage, you could have issues.

All I am trying to say is be careful and calculate the risk. I am not scare mongering, I am trying to put the thought of the worst possible scenarios to you. Your repay vehicle to just re mortgage in 5years is in my opinion a very risky one when you are borrowing against the house such a high amount of money.

djphig

There is no risk in regards to being able to remortgage with another lender. Prestige Finance sits 2nd on land registry and it stays that way. You are arranging a Second Charge not a first and that is the offer you will sign. Prestige will not have a right to go first.

Generally second mortgages are only kept for about 4-5 years before people remortgage, generally onto a better rate. There are always more specialist lenders for people with adverse credit. I highly recommend speaking to a reputable mortgage broker when it comes to remortgaging

Gareth43

Thanks all for your comments,
I have re evaluated the amount I wanted to borrow and reduced the amount to 40k by leaving out some of the work which could possibly be done at a later stage and only consolidating one of my debts ( the other is paid off in 1.5 yrs) what concerned me was the second charge and how reputable prestige is, risk wise i think it needs to be done after 5 year fixed i would have paid 26k off the 40k so to remortgage for my current mortgage value plus the 14k outstanding on the second charge is a lot better than borrowing 65k.

djphig

Hi Gareth,

Prestige Finance is a reputable company. All second charge mortgage providers are governed by the FCA in the same way the likes of Halifax, Natwest etc are. The only difference really is that they are a more specialist lender and as such, not so readily available on the high street. Second Charge Mortgages were previously called secured loans but are now regulated in exactly the same way as normal mortgages so nothing underhand or “dodgy” goes on.

You must take into consideration that although after 5 years you might have paid £26k but don’t forget you pay interest every month so your outstanding balance won’t reduce by the same amount as your monthly payment.

Any questions please let me know - I am a second charge mortgage advisor

Silveirinha

Hello,
My ex husband and I took out a secured loans with Prestige (then GE money) 15 years ago. My ex shortly left me after that when I was on MAT leaave. As I was on MAT leave I quickly found my self in arrears. My EX never contributed a penny. For the last 6 years I have made every monthly payment plus a bit extra to bring down my arrears. However when i got a statement it said I still owe 34K (original amount) and that I was being charged intererst on the arrears (2k) . My monthly paymetns are £420 ( including extra for arrears) however my interest is nearly £300 a month. My loan is due to expire in 2021 yet I still owe nealry the whole amount. Is this allowed? is there anything I can do? Thanks

ACG

Ask them for a full breakdown of your balance every month.

Going off your post you took out a loan, within a few months you stopped making payments/full payments which appears to have been the case for 9 years. If you went in to arrears and have only been making payments in full on time for 6 years, then it is quite possible you still owe the bulk of the loan. Do not forget the effect of compounding interest can have, it can increase the balance quite quickly if no payments are being made.

The balance comes down quicker as the balance reduces, it looks like yours did not reduce for 10 years so you are technically only 5-6 years in. It seems reasonable that the balance would not be a lot lower.

But as mentioned, get a breakdown. If you do not agree with it, put a complaint in.