The Client:
Our client’s objective was to consolidate as much unsecured debt as possible including credit items with interest rates as high at 29.9% and some with low to 0% interest rates, which were scheduled to shortly revert to 20% plus rates in a few months’ time. In addition to some personal loans, the Client was finding it difficult to cope and very stressed.
Scenario:
The client’s financial circumstances deteriorated due to Covid 19 pandemic when the client had been put on furlough. The credit was taken out to supplement the client’s income during this financially difficult time and resulted in a negative disposable income situation for the client. The client wishes to consolidate all of these items onto better terms with just one low monthly repayment and to give the revolving credit a definite end date. The client understood that if action wasn’t taken now, they would not be able to meet the monthly payments to their unsecured creditors and could have an adverse impact on the client’s credit file and any future remortgage options.
The Solution:
A Second mortgage was raised for the client. This in turn protected their existing mortgage rate and not having to pay the early repayment charge with the existing mortgage lender.
The second mortgage reduced the client’s monthly outgoings from £1,600 per month to a more comfortable repayment of £450 per month. This is turn helped the client to keep their credit report intact, and the client was no longer in a negative disposable income situation and had funds left over for a better quality of life and funds left over for any life events.
The pressure and stress was fully removed from the client. The client only needed to focus on paying the first charge mortgage and the second charge mortgage, rather than having to manage multiple creditor payments each month for the unsecured credit.
By settling all the unsecured credit this also helps the client to be in a better position for remortgage options in the future when their fixed rate ends. The second mortgage was offered at a fixed rate to fit in line when the first mortgage fixed rate ends. The client will then be able to remortgage when both the fixed rates end on the first and second mortgage without incurring early repayment charges.
This resulted in a very happy client and a returning customer for the remortgage.
Summary:
Second Charge Mortgages can be a great solution for clients wishing to consolidate multiple expensive sources of credit into just one loan, as well as a great solution to also release equity from their home. Second Charge mortgages run alongside the existing (First Charge) Mortgage and therefore no expensive Early Repayment Charges (ERCs) are incurred.
If you are interested in finding out more about Second Charge Mortgages then either call us today on 03303 112 646 to speak directly with one of our CeMAP qualified Mortgage Advisors. Alternatively, simply complete this short online form to send us an enquiry and one of the Team will call you asap.