According to our data, 50% of Shawbrook customers take out a second charge mortgage for home improvement purposes. This is perhaps understandable as the average loan size is £50,000, which lends itself to larger ticket items such as extensions and large-scale refurbishments where the customer resides in the property. Further to this, 40% of our customers use a second charge mortgage for the consolidation of debt. A second charge lends itself perfectly to this purpose as customers can consolidate outgoings above £30,000, something that some banks won’t lend against in a remortgage scenario.
The last 10% of customers use a Shawbrook second charge for ‘other purposes’. So, what could these ‘other purposes’ be?
- Wedding – With the average wedding now costing over £30,000* a second charge could prove a great way of funding the impending nuptials of your customers or their family
- Tax bill – Along with debt consolidation above £30,000, some banks may also not lend to customers wishing to use the proceeds to repay a tax bill. Shawbrook on the other hand will lend for this purpose
- School fees – Did you know that your customers wishing to privately educate their children will now pay on average £17,000 per year** for school fees. Not to mention the boarding and ancillary costs, such as uniform, school trips and extra-curricular activities that will bump up this cost even further
- Business purposes – Shawbrook lends to business owners wishing to expand their existing business i.e. through the purchase of additional stock, increasing floor space or buying new machinery
- Deposit for additional property – If you have customers looking to invest in property, we also lend to people wishing to place a deposit on a buy-to-let property or a holiday home
- Gift money to a child – According to the Financial Times*** ‘the property wealth of your parents is crucial to getting on the [property] ladder’. Parents wishing to help their offspring put a deposit down on a property, could do so by taking a second charge on their own home. This isn’t the only reason to gift money to a child. We would also help parents put their child through university or purchase their first car, to name just two
- Transfer of equity – A transfer of equity is when someone is added or removed from ownership of a property, a process that happens in divorce proceedings. We can help your customers who wish to buy out fellow owners of a property, so that they own it outright, by providing the finance to repay the equity that the other person(s) has in the property
- Lease extension – If you have a customer with a short leasehold left on their property, they could extend it by using a second charge. By extending the leasehold, the customer should see an increase in the property’s value and its ability to sell
- Holiday – Customers wishing to take a once-in-a-lifetime trip, perhaps jetting the whole family off to Orlando or a round-the-world cruise, could do so with a second charge mortgage
- Medical procedures – A second charge can also help your customers to pay for private medical treatment and/or procedures
- Car purchase – If you have a customer with a passion for classic cars, perhaps we could help (the maximum term for a Shawbrook second charge mortgage for a car purchase is 5 years)
As you can see, a second charge mortgage can be used for a variety of purposes. So, the next time you find yourself with a customer in the scenarios listed above, perhaps give a thought to whether a second charge mortgage could offer the best outcome for their circumstances.
* source: https://www.independent.co.uk/life-style/love-sex/wedding-cost-uk-average-how-much-marriage-ceremony-bridebook-a8460451.html
** source: https://www.independent.co.uk/news/education/education-news/private-school-fees-rise-average-year-inflation-isc-census-parents-term-costs-a8325001.html
*** source: https://www.ft.com/content/2d138594-f87c-11e8-af46-2022a0b02a6c