Flexibility and speed with second charge mortgages

One of the many advantages of taking out a second charge mortgage is the speed at which the funds can be provided to the borrower.

This makes them a useful and effective capital-raising tool in situations where the borrower needs to access funds quickly.

Taking out a second charge mortgage is often much faster than remortgaging.

This is mainly because the application process is more streamlined than applying for a standard mortgage, and the loan amounts are often smaller.

An additional benefit of applying for a second charge mortgage is that there is typically no need to enlist a solicitor to carry out any legal and conveyancing work, as the majority of second charge applications are conducted by brokers who directly liaise with lenders.

This, coupled with the fact that physical valuations are also not generally needed—as an AVM is usually more than sufficient—helps to prevent any back-end delays and allows funds to be released more quickly, saving both time and money.

Second charge mortgages have grown in appeal over the last few years as the higher interest rate environment saw consumer affordability challenged for the first time in over a decade.

This led to brokers and their clients seeking an alternative capital-raising solution to remortgaging and quickly realising the benefits of a second charge loan as a swift and flexible way of tapping into the equity in their home without having to touch their first charge mortgage.

Demand in the sector remains high, with new business volumes growing 17% in November 2024, according to the Finance & Leasing Association (FLA).

In fact, the FLA recorded growth in the second charge mortgage market during every month in 2024, as borrowers sought to capitalise on the speed and efficiency of this capital-raising tool.

One of the most common reasons why a borrower takes out a second charge mortgage is to consolidate debt.

However, there are a number of reasons why a borrower may need a swift cash injection, such as:

• Home renovation
• Help a family member purchase a property
• Pay a tax bill

Given the ongoing popularity of the product and the continued demand for speed and efficiency, it is little wonder that there have been a number of enhancements to the criteria used to assess second charge applications, allowing for quicker completions.

This includes using enhanced home track rules, which reduces the need for a full valuation on the property being used as security.

Online identity checks also eliminate the need to wait for signed direct debit and application forms to be returned to the broker, further accelerating the process.

Another recent enhancement is that completions can also be achieved with consent to follow, meaning lenders can make a conditional offer when consent from the first charge lender is the only thing outstanding.

Greater efficiencies across the second charge mortgage market mean approvals can now be secured in record time, often in a matter of days.

For example, Norton Broker Services recently completed a £60,000 deal with Pepper, in which a case was sent to the bank on a Friday after receiving the outstanding documents.

A binding offer was issued that same day, with the case completing the following Monday morning at 11:00 am.

In another case, this time with Norton Home Loans, the application was packaged and sent to the lender on 7th January, with the binding offer received less than 24 hours later the following day.

In both cases, no valuation was required, helping to streamline the process and allowing the borrower to access funds quickly.

A £25,000 home improvements application to Interbridge was submitted with the binding offer issued later the same day.

The speed of execution and expertise of those involved in the case enabled this particular deal to be completed with absolute certainty and minimal friction.

While some cases may take a little longer, securing a second charge mortgage in a matter of days is now commonplace in today’s market.

As a result, for borrowers looking for a fast and flexible option to raise funds, a second charge mortgage may be worth considering to help them get the funding they need within a short timeframe.