What is a further advance or second charge?

A further advance and a second charge are different types of loans that allow homeowners to borrow additional funds.

 

This option is available to borrowers who have built up equity in their property and need extra money for various purposes, such as home improvements, debt consolidation, or even to fund a large purchase.

 

 

How do I apply?

To qualify borrowers must meet certain criteria set by the lenders. These typically include having a good credit score, a stable income, and sufficient equity in the property. The amount of additional funds that can be borrowed will depend on the borrower’s circumstances and the lender’s policies.

 

Interest rates are usually lower compared to other types of loans, such as personal loans or credit cards.  This is because the loan is secured against the property. Additionally, the repayment terms are typically longer, allowing borrowers to spread the cost over a longer period.  Second charge rates are generally higher compared to further advances but sometimes provide a solution should a further advance be unavailable.

 

A further advance is obtained from the current mortgage lender, a second charge is typically obtained from a different lender.  This means that borrowers have the option to compare different lenders and choose the one that offers the most favourable terms and interest rates. Sometimes a lender will use an Automated Valuation Model (AVM) which is typically free but in most situations, a valuation will be required at an additional cost to the borrower.  This is so the lender can value property and establish the loan to value which will ultimately dictate the interest rate available.

 

 

Do I need a Solicitor?

A solicitor is not always required as the process is usually managed directly between the borrower and the lender, however, seeking legal advice can help you understand the implications and terms of the additional borrowing.

 

It usually takes between six to eight weeks for the money to be released but it can vary depending on your lender’s process and how long it takes their underwriters to review your application.

 

When it comes to choosing between a further advance mortgage and a second charge, it’s important to carefully assess your financial needs and goals and  assess your financial situation to consider whether it’s the right option for your needs.

 

For more information contact Shannan Cliffe today on 01270620555 or email shannan@watts-ifa.com