Gain a real understanding of second charges
It’s no secret how difficult it is to get the services of a tradesperson right now or how expensive parts and labor seem to be. Everywhere you look, someone seems to have had, have, or at least intend to have work done on their house or garden. The number of garages I have seen that are so far from where a car resides is frankly incredible.
Given that the costs associated with such work appear to have increased steadily, the ambition of projects has skyrocketed, and some historically low rates are consistently offered by a variety of lenders, it is no wonder then that the number of people taking out second mortgages to finance their home improvements has increased over the past year.
This was evident in a recent Shawbrook Bank survey which found that 81% of second-load brokers saw an increase in demand for financing to fund home improvement projects. Brokers reported that half of their clients were borrowing to finance a remodeling project that included fitting out a new kitchen or bathroom, while the other half used the funds to finance an extension or renovation. conversion of a loft.
Confidence is also increasing in the middleman market, with 87% of second-tier brokers reporting increased confidence in the lending environment for the remainder of the year. This marks a big increase from the 30% who suggested having such levels of confidence at the end of 2020. In a further sign of optimism, 75% said they were confident in the growth opportunity of the company with the rest in mind. of this year. It also demonstrates a significant increase from a significantly lower figure of 19% in December 2020.
Commenting on the survey, Shawbrook Sales Manager Gavin Seaholme noted that: “A number of homeowners and real estate investors continue to rely on personal loans or credit cards to finance their DIY projects, which can be a riskier and more expensive approach to take. Understanding your client’s goals for the project as well as their current financial situation will help inform the path they choose.
I think he makes a really salient point here. All advisors, and many clients for that matter, are now fully aware of what a second charge is. However, understanding where such a loan can be of real benefit remains the key to maximizing the wealth of opportunities currently available.
Home improvement is arguably the simplest use of a second charge loan, but there are many other ways to use it successfully and be able to confidently identify and present a solution to meet a range of borrowing scenarios is no easy task. Second tier lenders are constantly innovating and coming up with new ideas / products / quotes to meet ever changing borrowing needs. This means that counselors who only occasionally encounter a case that they believe may benefit from a second charging option can often struggle to find an appropriate solution. Or turn down a customer because they haven’t realized that there is a viable and responsible product.
Identifying specialized loan scenarios is only half the battle. No one expects you to advise and fix them all yourself. Just establish your model – in terms of what type of business you want to focus on – and partner with a trusted packaging partner for the rest. This way, you can be sure that you retain the ability to meet all of your clients’ specialist needs, not just the simplest ones.
Daniel Yeo is founder and CEO of Specialist Finance Center