Mortgage borrowers are shifting their mindset. They are getting used to the new rate environment and increasingly taking more practical decisions regarding their future. As we move into the new year and households start to think about needing more space for their growing families or lifestyle, many will be thinking about extending their home rather than moving to a new property.
According to Halifax, the average cost of moving home is £12,000. With the cost of living crisis continuing to put the squeeze on household finances, this is a considerable outlay, and one that many are considering they don’t need to take on, especially if they are able to carry out home improvements to meet their needs instead.
Second charge lending has always been a popular choice for people carrying out home improvements, providing a flexible, cost-effective solution. Many homeowners will find they have enough equity in their home to raise the finance they need within the maximum LTVs of second charge lenders and affordability calculations. Considering a second charge mortgage can sometimes provide clients with greater borrowing potential.
One big benefit of making home improvements is that, in many instances, major renovations or additional space are likely to result in a significant increase in the value of the improved property.
This means that if your client were to take a second charge mortgage to pay for the work and then remortgage to refinance their existing first charge to pay off the second charge, the higher property value could potentially mean that they are able to achieve a lower LTV, and this could result in greater access to lower first charge mortgage rates in the long term.
So, if you have clients looking for new space in the new year, a second charge mortgage to fund home renovations could provide the perfect solution.
Stewart Simpson, Second Charge Mortgage Specialist