With the recent lowering of both buy-to-let and residential mortgage rates, savvy landlords and investors are turning to their existing assets to help raise capital. Here’s how specialist lenders can support them.
Lower but not low enough?
The Bank of England’s decision to lower the base rate to 5% in August – the first drop we’ve seen since March 2020 – was seen by many as a step in the right direction. Since then, the news has largely been positive for borrowers, with many lenders reducing their rates. However, according to research from Moneyfacts, it is residential products which are seeing the biggest decrease. In fact, they reported that at the start of July, the average five-year fixed residential mortgage with 75% loan-to-value (LTV) had an interest rate of 5.39%, compared to 5.59% for an equivalent buy-to-let mortgage.
How a second charge can help
For landlords and investors who are in need of equity but have an existing mortgage that they don’t want to disturb, a second charge bridging loan may provide the funds they require. Sitting behind a first charge, a second charge allows the borrower to unlock equity without impacting the existing mortgage. This allows them to utilise the money for a variety of different reasons, including purchasing a new investment asset, funding a refurb or injecting capital into a business.
A focus on versatility
Joe Grace, Senior Business Development Manager at MT Finance, is keen to point out how versatile a second charge bridging loan can be. There are, he says, still a number of borrowers who aren’t aware of second charge bridges or exactly how they can be utilised. For example, they may not know that their main residence can act as security for an unregulated bridging loan when the funds are being used for business purposes. “Some borrowers have maxed out the equity on their portfolio but have a small mortgage on their home with plenty of equity they can use. In circumstances where a client needs a quick injection of urgent funds then a second charge bridge can be a fantastic short-term solution.”
How a second charge bridging loan works
The process of applying for a second charge bridging loan is much the same as a regular bridge. The only real difference is that the first charge lender will have to provide permission for the second charge bridging loan in order for the application to proceed. Once that has been granted and interim terms are agreed on the offer in principle, your client will be asked to pay a valuation fee, unless the security is eligible for an AVM. The underwriters will then get to work on the case.
Solutions from MT Finance
At MT Finance, our second charge bridging loans have been designed to be fast and flexible. Available between one and 24 months, we will work closely with you to provide the best possible solution for your client. Key features include:
- Loans from £50,000 to £10,000,000
- Up to 65% LTV
- Available for residential and semi-commercial properties
- No exit fees and no early repayment charges
- No credit scoring
What’s more, we are now also offering AVMs on second charge bridging loans when the security asset is a standard residential property up to a maximum value of £750,000 and a maximum LTV of 60%. You can view the full AVM criteria here.
Get in touch
If you’d like to find out more about how we can support your client then we’d love to hear from you. You can email our broker relationship managers at enquiries@mt-finance.com or alternatively drop them a line via our online form and someone will be in touch shortly.