Securing a second charge for a divorcee left with substantial debt

What was the situation?

Our client was introduced to us by a long-standing client of LDN Finance, who we had previously assisted several years ago.

The client was a working professional in a secure job, respected and well paid.

What was the issue?

The client had recently separated from their partner, but due to reasons out of their control they had been left with a significant amount of debt that was in their name, although not for their benefit.

There were also historic arrears on car finance that, again although in their name, was not their debt. The partner had settled this but of course this was still showing on the client’s credit file.

What was the process?

Our client wanted a fresh start for themselves and their family following the split, and that started with lowering the payment on the outstanding debts. There were no arrears on their mortgage (which was in the client’s sole name) and they had a decent amount of equity in the property, but the client was fixed in on their interest rate for another 18 months.

The first approach was to apply for additional borrowing with their current mortgage lender, but the case was falling short on credit score above a certain loan to value (LTV). It also fell below the LTV’s maximum loan being offered, as it was a lot lower than what was needed.

Affordability from the clients and my perspective was not an issue, but the lender’s affordability calculation was punitive.

We then discussed taking a second charge, whereby a lender will lend money secured against the property. This type of loan sits behind the first lenders charge (the mortgage).

What was the solution?

After discussing the rates and monthly payments with the client, this looked to be a sensible route moving forward. We were able to max out the term, borrow the money needed to clear the debts and in doing so, commit to a rate that meant the overall blended rate of both mortgages was lower than if the client was to refinance and pay a penalty to their first charge lender. The lender would clear all the debts for the client on their behalf.

We also ensured that based on today’s circumstances, we will be able to refinance both parts of the mortgage away when her first charge fixed rate ends next year.

We successfully secured a competitive rate over 33 years on the clients second charge. This was on a repayment basis and saved the client over £400pcm meaning they could start to give their family more of the things they wanted to.

The client was very happy with the outcome and we have agreed to speak when the remortgage is due next year. At that point, we hope to bring the costs down even further so that we can repay the second charge.

Need some help in securing a second charge? Our experts are on hand to assist. Call 020 3903 9875 to speak to an adviser, or use our online contact form.