Getting a second charge buy to let mortgage is an important financial decision. Careful consideration and research can benefit landlords looking to increase their portfolio or access additional funds for property investments.
This guide covers what second charge buy to let mortgages are, the options available, the requirements you need to meet, and the process of applying for one. It is essential to consider whether a second charge buy to let mortgage is right for you before making any decisions.
What is a second charge buy to let mortgage?
A second charge buy to let mortgage is typically secured against an existing property you own, using it as collateral for the loan.
This second charge mortgage is defined by its second place on the list of priorities in terms of repayment, with your first mortgage being at the top.
The second charge buy to let mortgage can be used to purchase additional property, or it can be used for renovations or other investments related to the existing property.
It is important to note that a second charge buy to let mortgage does not replace your current first mortgage but provides additional funding secured by your property.
Why should you consider a second charge buy to let mortgage?
A second charge buy to let mortgage can benefit landlords looking to extend their portfolios. It is also suitable for those who need further advance or other circumstances to remortgage their property.
In addition, the funds obtained from a second charge buy to let mortgage can be used for extensions, refurbishment and renovation projects. The money received through a second charge mortgage can also be used for additional purposes, such as debt consolidation or capital raising.
What are the options available?
When looking at different second charge buy to let mortgages, it is essential to consider the options and features available. The two main options are fixed-rate and variable-rate mortgages, which offer different features.
Fixed-rate second charge buy to let mortgages are outstanding for budgeting as the interest rate will remain the same throughout the entire term of the loan.
Variable rate second charge buy to let mortgages, on the other hand, can be beneficial if you are looking for the flexibility of making extra payments or withdrawing funds from your loan.
Pros & Cons of second charge buy to let mortgage
It is crucial to consider the pros and cons of a second charge buy to let mortgage before making any decisions.
The main benefit of a second charge buy to let mortgage is that it can provide additional funds for investments or renovations without impacting your current first mortgage.
Additionally, you can use the money for any purpose, and the loan can be taken out over a longer term than some other mortgage options.
The downside of a second charge buy to let mortgage is that, as it is secured against your existing property, you will be at risk of repossession if you do not keep up with repayments.
Additionally, increasing interest rates may cause your monthly payments to grow too.
What requirements do I need to meet?
You must meet specific criteria to apply for a second charge buy to let mortgage.
This includes having a good credit score and a minimum income of £25,000 per year, subject to individual lenders’ criteria. Additionally, you will need to understand the property market well and demonstrate that you have the financial capacity to meet any repayments due on the loan.
It would be best to consider whether you could afford any additional costs, such as legal or arrangement fees, before applying for a second charge buy to let mortgage.
Process of applying for a second charge buy to let mortgage
The second charge buy to let mortgage application process is similar to an ordinary residential mortgage. You will need to provide certain documents, such as proof of income and identity, as well as details of your existing property and current debts.
Once you have submitted the necessary information, a lender will assess your application and provide an offer if they are satisfied that you meet all their criteria.
Upon acceptance of the offer, you must complete any additional paperwork required and then attend a closing meeting with the lender to complete the process.
What if I have bad credit?
If you have bad credit, being approved for a second charge buy to let mortgage may be more challenging. However, options are still available if you meet the other eligibility criteria and can demonstrate that you can repay your loan.
It is important to note that some lenders may charge higher interest rates or impose other restrictions on those with bad credit, so it is essential to shop around and compare different lenders to find the best deal.
Can I get help with my second charge buy to let mortgage?
You can always seek advice from a financial advisor or broker who can provide tailored guidance on the best deal for your circumstances.
They can also help you navigate applying for a second charge buy to let mortgage and ensure that all legal requirements are met.
When second charge mortgage on a buy to let property is ideal?
The second charge buy to let mortgages are ideal for those looking to invest in a property or to renovate an existing one.
They provide access to extra funds without impacting your current mortgage and can be taken out over a longer term than other mortgage options.
This type of loan is also beneficial if you need the flexibility of a repayment plan that suits your financial situation. It is also advantageous to make quick investment decisions, as the funds are available quickly.
Example of a second charge buy to let mortgage
John Smith is a landlord looking to remortgage his property. However, his current lender has told him that they cannot offer him a remortgage due to adverse credit, so instead, he decides to take out a second charge buy to let mortgage.
He applies to a lender who offers him a five-year fixed rate second charge buy to let mortgage with an interest rate of 5.5%.
He also agrees to pay an arrangement fee of 1% of the total loan amount and is told he needs to provide proof of identity and income before his application can be accepted.
John Smith then completes all the necessary paperwork and is approved for the loan. Next, he signs the mortgage agreement, pays his fees and sets up regular repayments to start making on his second charge buy to let mortgage.
Final Thought:
A second charge buy to let mortgage can significantly increase your portfolio or access additional funds for property investments. Understanding all available options is essential to ensure you meet the criteria before applying.
