A client recently approached Enness for help purchasing an investment property in Portugal. They wished to raise money against their primary residence in the UK in order to buy the second home – which they would rent out as a holiday let.
On considering the case, I quickly realised a second charge loan would be the most beneficial option under the circumstances.
The key reason for requiring a second charge loan was because most lenders won’t allow for clients to raise money against their home to take abroad. Also, the client’s company hadn’t performed well enough over the last three years to allow them to borrow the amount they required on top of their current mortgage with the standard 4.5 – 5x income offered by high-street lenders.
A second charge loan was ideal here as they were able to use a projected figure for the next year’s company trading profits, which the accountant could prove would be higher, as security. This, along with the more generous 6x income multiples they offered, helped the client borrow the amount they required to buy the property in Portugal. They were also happy with the client taking the money abroad.
Furthermore, the client’s current mortgage also had ERCs for the next year, so if I was to try and remortgage them to a different lender, they would have incurred these charges. By adding a second charge, these fees weren’t payable.
I was able to secure a rate of just 5.40% for the second charge, with the loan repayable on a capital and interest basis, meaning the balance would always be decreasing and they would eventually own the property outright.
The second charge had no ERCs, so when the client’s current product term ends, and their company profits have increased next year, they can look to remortgage onto a standard mortgage, consolidating the first and second charge loans to an overall much cheaper rate.