The Client:
The clients were a married couple who owned their residential home and two Buy to Let properties. The husband was self-employed and the wife a homemaker. The clients had multiple overdrafts which were almost up to their limits. The clients had been using the overdrafts to stay afloat, a credit card also up to its limit of £14,500 and took out unsecured loans. The client’s disposable income was in a negative situation. If the clients didn’t act fast, their credit files would be effected and this would jeopardise any future mortgage applications or the clients would end up with very high rates.
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Scenario:
The clients wanted to remortgage one of the Buy to Let properties that had a fixed rate of 2.6% which was due to end in 2026. The mortgage lender that the client was with didn’t have any Early Repayment Charge (ERC) whilst in the fixed rate period. With market conditions at the moment, the client’s rate would have doubled if we were to remortgage now. So, a solution was found to protect the relatively low mortgage rate, and to help client consolidate the unsecured credit to a more manageable repayment.
The Solution:
A Second Charge mortgage was raised for the client. This in turn protected their existing mortgage rate of 2.6% and helped to capital raise to settle unsecured credit.
The clients raised £43,000 by means of a second mortgage against the Buy to Let property and will be self-funding from the rental income alone. The second mortgage lender was happy to consolidate the unsecured credit.
The second mortgage reduced their monthly outgoings from £1,010 per month to a more comfortable repayment of £348 per month. The client is no longer in a negative disposable income situation. Their disposable income is now in a more positive position and the clients now have a better quality of life and funds left over for any life events.
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The pressure and stress they were experiencing was removed. The second mortgage offered is on a 2yr fixed rate, which will tie in nicely for when client is looking to remortgage when the fixed rate of 2.6% ends.
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 in 2026 and help client not to have an adverse impact on their credit file.
Summary:
Even with high levels of unsecured credit and negative disposable income it is possible to find solutions for our clients as we have the knowledge and tools to reach out to specialist lenders.
If you have any questions relating to Residential mortgages &/or non-standard scenarios such as this, contact us today to speak directly with one of our CeMAP certified Mortgage Advisors. Call us today on 03330 166 600. Alternatively, please complete this short online form and one of our Advisors will call you right back.