Stigma still surrounds the second charge market – but it really shouldn’t, says Masthaven’s head of sales, Jon Sturgess
Why are many brokers still not recommending second charge mortgages to their clients?
At Masthaven we have plenty of experience in second charge lending and these loans now represent a fair chunk of cases coming into the bank.
Yet go out and speak to a broker about seconds, and many will tell you they don’t do them or aren’t interested, preferring to recommend remortgaging instead.
I think a lot of it is to do with awareness – both on the part of the broker and the part of the end customer.
Remortgaging, for example, is practically mainstream. A much more familiar type of loan, it’s one people read about in the newspapers and probably know friends and family members who’ve taken one out.
But I really think brokers who don’t offer seconds as part of their product suite should start to factor them in and consider them when remortgaging doesn’t quite suit the needs of their customer.
Options should always be discussed openly and transparently, but it’s fair to say that a second charge loan can save the customer money in comparison to a remortgage.
In some cases, a second charge mortgage might be the best, most appropriate option for the customer, especially if:
- They’re tied to a fixed period first charge mortgage
- Were employed but are now self- employed so don’t meet the requirements of mainstream lenders
Perhaps more importantly, a second charge mortgage can match the purpose of the loan in terms of its lending period.
A customer’s wealth is not just about their disposable income today versus after the loan – it’s about how much money they have to pay out over the course of it, and a second charge mortgage can be a lower cost alternative because of the reduced term.
A great broker will guide and navigate a borrower through the cost comparisons, provide the customer with the options, and should be very clear in pointing out the pros and cons so they can make an informed decision.
Second charge loans can also work out cheaper than remortgaging – and they often come with no early repayment charge.
Time to give second charge mortgages a second look? I think so.