FT Adviser – Arranging a Second Charge Mortgage

The start of the process to get comparison quotes or refer secured loans is very simple.

For introducing brokers, Steve Walker, managing director of Promise Solutions, says the start of the process to get comparison quotes or refer secured loans is very simple.

Quotes are available online in around one minute or by telephone or using a written decision in principle form, he says.

Mr Walker says: “Mortgage brokers can choose to remain involved in the sales process by liaising with the loan underwriters and quoting clients themselves.

“Alternatively, once they have satisfied themselves that the secured loan option is suitable, they can refer the sale of the loan to the loan broker.
“The loan broker will undertake all the packaging and client liaison where appropriate and the introducing broker can monitor progress and ensure that the loan remains suitable if the product changes for any reason.”

However, introducing mortgage brokers should take care as many loan “specialists” have not yet aligned their businesses to the “rigours the regulators would want to see”, Mr Walker warns.

Therefore he says advisers should always choose a loan master broker which has compliance and technology at the heart of their proposition.

Mr Walker says: “The ‘old school’ approach of comparing loans by rate no longer stands up so expect your master brokers to be able to compare loans by repayment, fees charged, total cost of borrowing, early repayment charges and total cost of credit.

“A good master broker will offer this and support you selling the loan or adopt a similar approach if selling the loan on your behalf.”

Paul Crewe, director of Smart Money, says brokers will find that it is packagers that are able to review the clients’ needs and future intentions and quote the most suitable product.

If the customer agrees with the quotation, Mr Crewe says an application pack is issued to the customer and the consideration period begins where the client has time to make up his/her mind whether to proceed.

Eight days after the loan pack has been issued, Mr Crewe says a signable copy of the loan agreement is issued to the customer. The consideration period expires in a further eight days, or when the customer returns the signable loan agreement.

He adds further processing will take place such as supporting documentation and valuation such as desktop, driveby or full valuation.

In terms of what you can expect to be paid when arranging a second charge mortgage, nothing more than a token £5 upfront fee can be charged to the customer, says Matt Tristram, owner and co-founder of Loans Warehouse and Clearly Loans.

He says what that means is the second charge mortgage broker bears the cost of any fees involved in arranging the loan, such as the property survey, mortgage questionnaire, mortgage consent, etc. A fee is typically added to the loan to cover costs for the broker.

Mr Tristram says the application itself is less onerous than a standard first charge mortgage application as the broker carries out the majority of the work themselves, liaising with the customer throughout the process to ensure as swift a completion as possible.

Generally speaking, Mr Tristram says the customer is just required to provide the usual suspects of mortgage applications such as proof of income, residency and identification. Typically the process from application through to completion takes between two to three weeks, he adds.

Second charge mortgage lenders are typically exclusively intermediary facing, says Mr Tristram.

Therefore, he says the way to obtain the best second charge mortgage product available is to register with a master broker with whole of market access, who will have a process in place to ensure your client receives the most suitable product available.

While being similar in definition to first charge mortgages, Mr Tristram says advisers will often find that the master-broker deals exclusively with second charges and therefore they understand the areas where the products and processes differ.

Alan Cleary, managing director of Precise Mortgages, agrees it is best to use the services of a master broker to obtain the best second charge mortgage.

He says: “They have access to second charge mortgages from many different lenders. Alternatively, the internet has a vast array of information about different products.”

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