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How to identify a potential secured loan from a declined remortgage

A. Go to the relevant section to learn if a secured loan might be available
B. Identify, from the list below, the main reason or scenario which stops you placing a remortgage
C. Contact Promise Solutions

Main areas where a secured loan will help plus other options

  1. Age
  2. Income
    1. Employed
    2. Self employed
  3. Adverse credit
    1. Unsecured arrears
    2. Mortgage arrears
    3. CCJ’s and Defaults
    4. Bankruptcies and IVA’s
    5. Cautions and charges on the property
    6. Heavy Adverse credit
    7. Subprime business loans
    8. Client pension investment in own business. HMRC/FSA compliant
  4. LTV
    1. Up to 75%
    2. Up to 85%
    3. Up to 95%
    4. Up to 125%
    5. Unsecured
  5. Loan Purpose
    1. Domestic – home improvements etc
    2. Consolidation
    3. Business
  6. Larger Loans – £50000 to £500,000
  7. Buy to Let second charges
  8. Bridging and development
  9. First charge with poor income or adverse credit
  10. Property
    1. Ex council
    2. Low value
    3. Non standard / non weather tight / unmortgagable
  11. Referrals

1. Age
Secured loans are available to age 80 at the end of the loan term (and beyond in some cases). We also have interest only loans available for older applicants. If borrowers wish to borrow in to retirement the lender will ask how the loan repayments will be affordable – some will ask for more proof than others.

Other thoughts

  • If downsizing is there a bridging option
  • Consider equity release – income and adverse not an issue
  • What might be available through any unutilised pension

2. Income

  1. a. Employed
    Using detailed income and affordability calculations we have secured lenders which can regularly lend to 10 X income multiples and beyond. 6 X is the norm with rates from 5.59%. Using income and expenditure assessments, the calculation of affordability is much more robust and accurate than the typical multiples used by mortgage lenders. Existing credit is an important factor in affordability – some lenders will settle credit direct with the lenders, others will allow clients to settle the credit themselves on receipt of the loan
  2. b. Self employed
    Ideally we would like 2 years accounts which give clean borrowers access to rates from 6.54% and loan amounts up to £200,000. However an accountant’s projection, bank statements and self assessments are all an option. Some of our lowest rate self employed products (currently 7.9%) are available based on an income assessment using banks statements and there are loan plans all the way up to 95% at higher rates. We can also use the accountants projected income if the previous years accounts are poorer. Where accounts or bank statements are not available, or don’t reflect all of the income earned (cash payments etc) borrowers can self declare income backed up by an affordability assessment – up to 75% LTV – the rates are high on this scheme so we always explore income in detail first.

3. Adverse credit

  1. a. Unsecured arrears
    Many lenders will ignore unsecured credit arrears therefore up to 75% LTV they don’t pose too much of a problem although could rule out some of the cheapest lenders which credit score. Above 75% it’s on a case by case basis dependent on what is shown on the credit search with loans available from main stream lenders up to 90/95% LTV and specialists lending over 125%LTV – see 125% LTV below.
  2. b. Mortgage Arrears
    Many of our lenders only look at the last 12 months mortgage history so again up to 75% LTV you have a few options. The 85% LTV lenders will look for a decent credit score and potentially 2 years clean mortgage history. However if there are a few small glitches, I suggest we give it a try for you. If your client still has significant historic arrears outstanding but has paid the last 12 months on time, we have lenders which will consider this as a clean case. If there are high arrears in the last year we have a number of lenders available (up to 75% LTV) depending on the equity and loan amounts needed.
  3. c. Occasional CCJ’s and Defaults
    Most secured lenders are looking at recent conduct and we can ignore a lot of historic smaller CCJ’s, defaults and arrears – again options will vary dependant on level of adverse, loan size and LTV but as an example we can still place a £50000 loan up to 80% LTV, where there is a missed mortgage payment over 6 months ago plus minor satisfied CCJ’s and unsecured arrears. We have lenders which will totally ignore CCJ’s and defaults which are over 2 years old even if they are unsatisfied. Therefore clients could have outstanding adverse credit and still qualify for rates starting at 6.9%. Other lenders look at the size and date of adverse credit. For example CCJ’s and Defaults under £300 can be totally ignored. If less than £3000 and satisfied they can also be ignored. Where CCJ’s and Defaults cannot be totally ignored, we have various plans where the rates will rise and LTV’s reduce dependant of the number of adverse points. See heavy adverse below.
  4. d. Bankruptcies and IVA’s
    We have three lenders which will pay off a bankruptcy (i.e client is currently bankrupt) or an IVA normally up to 65% LTV and loans up to £50,000. However, if the bankruptcy is a number of years ago – e.g 4, and the clients have maintained everything else up to date since then, we have a lender which will consider larger amounts up to 85% LTV. We can also pay off debt management plans and remember, with the loans all being in arrears, we can look to negotiate reduced settlement figures so £50000 of unsecured debt could be settled with a £25000 loan. Our team does all of this in house. Loan are available up to 75% LTV for those on debt management or who have now exited a bankruptcy or an IVA
  5. e. Cautions and charges on the property
    Cautions or charges may be registered on the borrowers property due to divorce settlements, historic non payment of debts to name a few. Our lenders are generally adept at settling such charges from the proceeds of the loan with an undertaking from the borrowers solicitor to remove the charge on receipt of the loan proceeds.
  6. f. Heavy Adverse Credit
    Don’t forget we have lenders which will look at unlimited adverse credit so even if we can’t ignore certain adverse credit as above, there are still lenders to help. As a guide loans with over 6 month arrears etc are available up to £30K at 65% LTV, £15K at 70% LTV and £10K at 75% LTV. With lower levels of arrears and CCJ’s etc we can look at higher loan amounts and stretching the LTV’s upwards. We also have lenders offering lower rates to heavy adverse borrowers (from 15%) at 65% LTV
  7. g. Sub prime business loans
    Often used where a business is recovering or needs to repay bank debt urgently. Heavy adverse, second and third charge, no accounts, business start ups are accepted. Our lender will lend to limited companies and established sole traders secured on residential (65% LTV) or commercial (50% LTV). Terms are available up to 10 years which provides one of the only options available for company’s with poor accounts or adverse credit to raise money for cash flow.

    • Heavy adverse considered – loans up to £250K
    • Affordability can be based on clients projected income – don’t need accounts.
    • Can take a first, second or third charge on residential or commercial property.
    • Repayment periods up to 10 years
    • Repaying arrears or bank debt no problem
  8. h. Client pension investment in own business. HMRC/FSA compliant
    We have this product and a range of other schemes which allow business owners to use money in their pensions for the benefit of their business. The minimum pension pot is normally £50000 and generally needs to be frozen but can allow the business to use up to 100% of the pension after costs. Other schemes are available for smaller pensions allowing access to between 10% and 50% of the pension. We can put your client in touch with a number of organisations which may be able to help all of which will deal direct with your client so you are not involved. We always recommend clients take independent advice from a pension specialist

4. LTV

  1. a. Up to 75%
    Many more lenders available therefore higher levels of adverse credit allowed and greater income stretches. Even the straight forward cleaner applications will get a better rate for lower LTV’s
  2. b. 75% to 85%
    Generally applications must have relatively clean recent credit although historic adverse may be considered if not significant – eg CCJ’s or defaults under £500 or secured arrears over 2 years ago. Some lenders will ignore satisfied CCJ’s or CCJ’s over 2 years old – let us have a look at these cases
  3. c. 85% to 95%
    Rates are higher – 14% to 22% and applications need to have strong credit profiles. 1 lender will look at a few missed unsecured payment so long as not significant. At 90% we can still potentially get loans for between £30,000 and £100,000 for quality employed applicants
  4. d. Up to 125%
    Don’t ignore high LTV loans. Whilst the maximum loan amount is £10000 and the rates start around 20% APR for 100% LTV%, we can arrange loans with unlimited LTV and accept mild historic adverse. Remember, if there is an existing second charge at a decent interest rate, these lenders will consider taking a third charge. Yes the rates are very high but the next stop for many of these borrowers could be a Pay Day loan where the interest rates are often 20 to 30 times higher and loans need to be paid back within a month to avoid additional charges.
  5. e. Unsecured
    We have three main unsecured lenders as follows

    • £1000 to £25,000 – from 8.8% – max term 60 months – clean credit only
    • £5000 to £50,000 (per applicant) – 14.9% – fixed for 15 year term – clean credit
    • £500 to £10000 – Rates from 35% upwards – will consider mild/historic adverse

    These products are all available on the website for brokers to apply themselves on behalf of the borrower. Do not use the fast referral method

5. Loan Purpose

  1. a. Domestic – home improvements etc
    No major problem as long as the use is legal. The loan purpose must make sense in the context of the application e.g. spending £150,000 on home improvements on a flat worth £75,000 is going to raise questions. Some lenders will ask for plans to back up large home improvement projects – especially if the borrower is self employed. Take care if the loan purpose is to use as a deposit to buy another house – some won’t accept this, others will only do so if the property being purchased is for personal use – e.g. a holiday home rather than a BTL
  2. b. Consolidation
    Not generally a problem – in fact some lenders like to see a minimum percentage of the loan being used for consolidation. They will want to see that the client is in a better situation as a result.
  3. c. Business
    With many lenders business use is not accepted or the loan will be offered on different terms. As business finance can fall outside the CCA, the redemptions may be higher and certain products not available. Talk to the underwriters on 01902 585052

6. Larger Loans – £50000 to £500,000

Below is an overview of the main lenders offering larger loans

  1. Nemo
    • Up to £200,000 at rates from 5.592% up to 55% LTV (7.008% up to 70% LTV)
    • Higher LTV’s available up to 90% but higher rates, lower loan amounts and income multiples up to 6X
    • No Lender fees
    • Lowest rate in the market
  2. Shawbrook
    • Rates start at 6.9% for loans up to £100,000 at 65%LTV – will consider up to £200,000 rates and LTV vary dependant on loan amount
    • Higher LTV’s available up to 85% but lower loan amounts
    • Income multiples up to 6 X
    • Will lend to self employed with bank statements to prove income
    • No ERC’s and maximum age 80
    • Generous attitude to considering out of criteria / unusual cases
  3. Blemain
    • Loans up to £250,000 (more on referral) LTV’s are lower than above with loans above 50K up to 70% LTV
    • More adverse accommodated which impacts on LTV
    • Income calculated on affordability so an equivalent to 10X is not unusual
    • Will lend for business purposes
    • Will accept more adverse than Shawbrook or Nemo
    • Interest only available and max age 80
    • More generous income calculation
    • 2nd charge available on BTL up to 65% – recent adverse accepted
  4. Step One
    • Loans up to £100,000 available on referral and LTV’s available up to 85%
    • Rates start at 8.9% and on other plans will consider small levels of adverse at high LTVs which would fail other High LTV plans
    • Income based on affordability (10X) so will accept cases which fail income on Shawbrook and Nemo but cheaper and higher LTV’s than Blemain
    • Will lend for business purposes with standard CCA redemptions (2 months interest approx)
    • More generous income calculation
    • Will accommodate larger loans and light adverse at higher LTV’s
    • Happier to accept lower value / ex council properties at higher LTV’s
    • 2nd charge available on BTL’s up to 70%

7. Buy to Let second/first charges
First and second charges are available on Buy to Let properties and can accommodate adverse credit, age up to 80, recent purchases, lower incomes and landlords living abroad. We don’t need borrowers to demonstrate additional income if the rental income covers 120% of the mortgage/loan outgoings. If a tenant is not yet in place we may have a bridging type solution to help purchase and refurbish the property which subsequently converts to a term loan on capital /repayment or interest only

8. Bridging and Development Finance
Bridging can often provide a short term solution to a problem and create an opportunity to refinance in the future. Standard residential bridging is often used where there is insufficient income to support all borrowings or where the equity in multiple assets needs to be used to support the loan. Every case is bespoke and requires us to understand the whole picture. We are happy to talk to your client direct or deal through you. A sample of the main products include

  • Non Regulated residential bridging – first charge up to 80% – 75% more realistic
  • Development bridging – up to 65% of the GDV
  • Light and heavy refurbishment bridging – up to 75% LTV
  • FSA regulated first charge bridging – up to 75% LTV
  • CCA regulated second charge bridging – up to 65% LTV
  • Our 1 week non regulated or second charge bridge – when speed is vital – up to 70% LTV

The above are lenders published terms – each case is individually underwritten and most lenders will normally aim 5% below their published LTV except in exceptional cases.

9. First charge with poor income or adverse credit.
We have a small number of lenders which will consider FSA regulated 1st charges with adverse credit, benefit income only or for older applicants. Maximum LTV is normally 60% and each case is looked at on merit – please talk to an underwriter

10. Property

  1. a. Ex council
    With some lenders the LTV will be reduced on ex council properties – others are less worried. In the case of ex council flats most lenders will not lend. There are exceptions subject to a maximum of 4 floors in the block at a maximum LTV of 65%. There are exceptions, particularly for ex council flats which are now in a desirable sought after area. If in doubt speak to an underwriter
  2. b. Low value
    Most lenders are not keen on granting loan secured on properties valued below £85,000. There is a range of values from £80000 to £125,000 where lenders have less appetite and therefore the terms are less competitive. However even on values below £80,000 if the LTV’s are low (below 60%) it is worth referring.
  3. c. Non Standard / Non weather tight / Non mortgagable These are not popular with the standard second charge lenders. However, some have been known to do unusual things on referral. They will be looking for stability and a genuine intention to move in or repair the property. Definitely worth speaking to the senior underwriters once you have the story. We can also look at some form of bridging or development loan if necessary

11. Referrals
If you feel a case has merit it is always best to speak to a senior underwriter. We have very close relationships with our lenders and, with some lenders, expect 40% of our business to be accepted outside normal terms.

For an expert opinion call 01902 585053 and speak to an underwriter.