Got a mortgage and a secured loan already? Consider a 3rd charge.

You may have a great deal on your mortgage and existing secured loan so paying either of them off to raise extra capital won’t always be possible or in your best interests. These new 3rd charge loans could be the answer for some people.

Imagine you want to raise more cash but your circumstances mean that refinancing would be at a higher rate or difficult.

  • It could be that borrowing more on your mortgage might increase the ratio of borrowing against the value of your house and attract a higher interest rate.
  • Similarly your circumstances may have changed – credit history, change of employment etc – so you can’t get rates as good as you currently have.

Let’s try an example to demonstrate the maths – You have a £400,000 mortgage, a £30,000 secured loan and want to borrow a further £20,000 – Total £450,000

 

Borrow extra by remortgaging                                    Monthly interest only payments

Your new mortgage        £450,000 at 2.75%                     £1031

 

Borrow extra on a third charge                                   Monthly interest only payments

Your mortgage               £400,000 at 1.75%                     £583

Your secured loan          £30,000   at 4%                         £100

Extra cash needed         £20,000    at 12.8%                    £213

Total monthly payments                                                 £896

Important

  •  Interest only payments have been used so you can follow the maths – you are more likely to have capital and repayment loans so the payments will be higher.
  • This is just an example – speak to a mortgage adviser to work out what is best for you – it might be a remortgage or even a further advance.
  • Our third charge lender also considers some circumstances your mortgage lender probably wont:
    • 5 months current arrears – max 2 months in last 12 and must have paid the last 3
    • Maximum of 2 payday loans in last 12 months
    • No missed unsecured in last 6 months but can have a  maximum of 3 months down in the last 12 months
    • Loans up to 100% of the property value.

Now that you know a 3rd charge product exists ask you adviser to check if it may be suitable for you. For some people it may be the only choice.