Second Charge Loan

beefio1

Dear All

Please can anyone help me with second charge mortgage?

Over the last few years I have amassed £85,000 of unsecured debt doing a house extension/renovation plus some other expenses on loans, credit cards and an overdraft.

The intention was for my wife to start working and then to remortgage however my daughter became ill/disabled so my wife is now her career and also our mortgage provider changed their lending criteria to exclude debt consolidation.

I am currently paying £1,600 per month to repay the unsecured debt, however next month my income is going to reduce by around £1,500 per month therefore I won't be able to afford these payments going forward and need to consolidate the debts in to an affordable payment.

My current mortgage provider Santander will not do this therefore I am looking at a second charge mortgage.

My new annual income which is still to be confirmed, will be around £60,000 plus my wife’s carers allowance of £3,359 and my daughters Disability Living Allowance of £4,157, so £67,516 in total.

My current outstanding mortgage with Santander is £357,422 over 32 years, fixed at 2.25% until June 2020 at £1,386.49 per month with a 5% £18k ERC and the property value is £700,000.

I have spoken to a loan broker y3sgroup.com who said they have an option for me and I am waiting to find out how much this will cost, but are there any other recommendations for me to borrow the £85,000 over say 30 years and reduce the payment to around £400 per month?

Any help would be greatly appreciated!

Yours sincerely

Stressed Rickmansworth

ACG

I think your only option will be a second charge.
Most lenders top out at 4.5x income, you may find 5x with a few lenders but your main mortgage is 6x income plus the extra debt will take you to around 7x income - you will never get a normal mortgage for that much.

beefio1

I agree my only option will be a second charge...the question is which provider would be best for me...

amnblog

£85,000 over 30 years at £400 is a rate of around 4% which is right at the most competitive of 2C rates.

Fixed rates will be priced from 4.24% making payments more like £420.

Also, watch the fees on the quotes you get back.

beefio1

OK thanks, yes around £420 would be perfect.

What sort of fee should I be expecting?

amnblog

Valuation fee could add up to quite a bit, perhaps £675. If you were getting away with £1,000 total Lenders fees + Brokers fees you would be doing very well.

foxy-stoat

beefio1 wrote: »

but are there any other recommendations for me to borrow the £85,000 over say 30 years and reduce the payment to around £400 per month?

I have one - dont turn £85,000 of unsecured debt into £143,680 of secured debt - assuming you get the finance for £400 a month.

You are miles better off down sizing and clearing this debt.

Good luck.

dimbo61

Agree and I think you should look for a property that is suitable for your families needs.
This is a lot of debt.
Could you find a smaller/cheaper place so you only have the Santander mortgage !

beefio

I hear what you’re saying but we won’t be selling the house unless we really have to.

I now have an ‘agreement in principle’ from West One Secured Loans via the broker Fluent Money the terms are as follows:-

- £85,000 plus fees added to the loan:-
- Lender Arrangement Fee £850
- Funds Transfer Fee £35
- Broker Arrangement Fee £4,995
- Duration of the loan: 30 years
- Fixed rate of 5.49% for 60 months
- Monthly payment £515.44
- No early repayment charge

West One also pay Fluent Money commission of £1,275 for arranging the loan

This is affordable for me so definitely an option, the £5k broker fee seems very high to me considering they are also getting £1,275 commission, but how does this compare to the general market?

Any other thoughts on these terms?

Are there any other providers/brokers that would be better value?

Many thanks

foxy-stoat

I better correct my previous statement, you are turning £85,000 unsecured debt into £191,000 secured debt.

If you can afford to waste £100K then go ahead, its your money, your home, your choice. The fact that you have got terms at all is a big step, the cost of the borrowing only reflects the risk involved in lending to you.

One thing to note that its fixed for 5 years then assuming it goes onto the variable rate - what is the lender's standard rate, and can you afford for the interest to rise without being able to do anything about it....the total cost of the debt could well be in excess of £200,000 at the end.

financegeek

that broker arrangement fee seems incredibly high for £85,000.00.

Seeing as you now know which lender it is, why not google second charge brokers and call a few to enquire what fees they would charge for arranging the same deal? i imagine you could bring that down a fair bit.

as second charges are regulated, if they're a genuine broker they should be happy to send you their terms of business to illustrate the fees they charge.

edited to say.. before you explore this route have you considered all options (including downsizing / Debt management plan / re mortgage) to make sure this is definitely the right one for you?

good luck