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Second Charge Mortgages: What to Know

Second charge mortgages, sometimes referred to as second mortgages, have a secondary priority beyond your primary mortgage. These financial products are a form of “secured” loan, which means that they use your home as a security, and many people use them in an attempt to raise money without remortgaging.

A second charge mortgage gives homeowners the chance to use any equity that they have in their home as a kind of equity against another loan. This means that you end up with two mortgages on your home. For those who are unsure, equity is the amount of your property that you own outright, which equals the value of your property minus any mortgage that’s owed on it. For example, if your home were worth £200,000, and you have £100,000 left to pay, you’ll have a maximum borrowing ability of £100,000.

Taking Out a Second Charge Mortgage

Lenders must now comply with stricter EU and UK rules regarding mortgage advice, dealing with payment difficulties, and affordable lending. This means that lenders need to make the same checks for affordability as they would with a primary or first-charge mortgage. Borrowers will also be required to provide evidence that they’re actually capable of paying back the loan that they’re applying for.

There are many reasons why someone might apply for a second-charge mortgage. For instance, they can be a good idea if you’re struggling to get unsecured money that you need for personal reasons, perhaps because of self-employment. Additionally, if your credit rating has been damaged since you took your first mortgage, remortgaging could mean that you end up paying more on your entire mortgage, rather than just interest on the extra you want to borrow.

If your mortgage has a very high charge for early repayment, you may find that it’s cheaper to apply for a second-charge mortgage than to remortgage your home.

What to Remember with Second Charge Mortgages

Although many homeowners consider second charge mortgages to be very useful, taking one can be a big step that must be considered carefully. For instance, if you’re only just capable of repaying your mortgage at this stage, you should remember that you risk losing your home if you can’t keep up repayments on both your mortgage, and second-charge mortgage.

Additionally, you shouldn’t use a second charge mortgage to pay off a range of other smaller debts such as unsecured loans and credit cards. This could mean that you end up paying a lot more in interest over the long term, because second charge mortgages can run for twenty-five years. Additionally, this can also mean converting unsecured credit into secured credit.

Often, before you consider taking out a second charge mortgage, you may find it’s a good idea to get advice from a qualified person. There are many different advice solutions out there that can help you to find the loan that meets your needs and financial situation. These advisors will also need to follow the rules of the FCA when assisting you.

Remember, when you’re looking to take out a second charge mortgage, you should make sure that you begin by approaching your current lender and asking what might be charged for an additional loan to be placed against your home. At the same time, it’s often helpful to shop around and make sure that you’re getting the best possible rate by comparing the annual percentage rate that is offered by each lender that’s available to you. You can also check on other factors such as the length of the loan time, and the amount that you’ll have to repay in total. Be sure that you also find out the exact fees, mortgage terms, and early repayment charges that are used in your specific case.

Understanding Binding Offers

Remember, when a lender makes you an offer, they will need to give you a complete explanation of the essential features of your loan. This will mean that the often give a personalized document, which explains the terms of your offer, the details of your loan application, and summarizes features including fees. There may also be a reflection period provided, and you’ll have seven days from the time that the offer is given to decide whether you want to accept.

During the time when you can reflect on the offer, the lender’s offer will be binding and it will stand to the terms that have been given. However, there are a few exceptions to this rule. For instance, changes may be made if the information that you gave in your application isn’t true. It’s important to take advantage of the time you have to think about the offer that you have received, and how it compares to other loans. Remember, you don’t have to wait for the full reflection period if you’re sure that you want to go ahead with the mortgage.

How Can You Increase your Credit Limit?

When you apply for a credit card, you usually won’t know what your credit limit is going to be, even though the credit provider might give you an insight into what the limit usually is for new customers. This can be a real problem for some people. For instance, you might want to transfer your existing balance so that you can try a new deal, but your credit limit might be too small for you to do so.

If you have a credit card, or you’re currently using your overdraft on your current account, but you want to know how you can improve the amount of credit you can borrow, then this might be the article for you. A lot of people wonder about increasing their credit card limit from time to time. Here, we’ll cover what you can do to start increasing your limit, and even more importantly, whether you should be considering doing it in the first place.

Increasing your Credit Limit

The good news for people who aren’t happy with their current credit card, or overdraft limit is that it is possible to request a higher limit from your credit provider. However, it’s generally a good idea to wait for several months before you do this, so that your lender can see that you’re a sensible customer that can be trusted to pay back the money that you borrow on time. However, if you exceed the limit on your card and miss payments, the chances are that your credit provider won’t agree to increase your limit. What’s more, you will also have a dangerous impact on your credit history which could prevent you from getting a better deal elsewhere.

A good thing to keep in mind is that when you want your lender to increase the amount of credit they give you access to, you’ll need to prove that you are very creditworthy. You won’t be given a higher limit if it seems as though you’re likely to default on your debts, or you won’t be able to repay the amount that you owe in full. Lenders will decide whether you are a suitable customer by looking at your credit record and taking out credit score checks alongside other checks.

Before you take steps to increase the amount that you’re allowed to borrow, you should think about a number of different factors that might help you to decide whether increasing your limit is actually a good idea for your specific circumstances.

What to Remember When Increasing your Limit

The first thing you’ll need to remember when you’re thinking of increasing your credit limit is that you shouldn’t try to increase your debt without the authorization of your credit provider. However, some banks and societies will allow you to pay out more than your limit, though there are usually very high fees for doing this, that can end up having an impact on your credit rating.

It’s worth taking the time to think carefully about why you want to increase the amount that you’re allowed to borrow in the first place. Although there might be some sensible reasons for your choice, there could be signs that you aren’t handling your debt as well as you should be. A good reason for increasing your credit limit might be because you use your credit card to pay for business expenses before you claim them back. If your expenses became suddenly greater, you’d need to improve the amount you can borrow to reduce problems with cash flow.

On the other hand, some people may want to increase their credit limit because they’re having problems when it comes to meeting their expenses on a regular basis. If this is the reason that you want to increase your limit, then you should think carefully about your finances and what you can do to improve your spending habits. Increasing your limit is likely to only make the problem worse.

If you’re having problems with the way that you spend money, then you’ll need to act quickly to make sure that you don’t get into an amount of debt that you simply can’t pay off.

Stay Away from High Cost Lending

if you aren’t able to increase the amount of credit you can access, then you might end up turning to expensive options for short-term lending instead. However, the truth is that borrowing at a high rate is often very dangerous and it can worsen the problems that you’re facing with your money.

Even if you aren’t risking taking on a lot of debt, upgrading your limit in credit might not be a good idea. A high credit limit can increase the temptation you feel to take on more debt than you would otherwise, and it might stop you from qualifying from important credit later on, like credit for a mortgage. This is because many lenders look at the amount of credit you have access to when they are deciding whether they should lend to you.

What to Know about Budgeting Loans

If you’re in need of some extra cash, then you may find that it’s a better solution to apply for a budgeting loan, rather than simply paying the high interest charges that come from standard doorstep lenders. Alternatively, there may be other help available from various local authorities.

A budgeting loan is something that can be used for a collection of different expenses, including travelling, clothing, maternity, furniture, funeral expenses, and more. If you’re not getting universal credit, then there’s a chance that you can apply for a budgeting loan. However, in order to be successful, you will need to be receiving some manner of income-based jobseeker’s allowance, income support, pension credit, or employment and support allowance. Additionally, you will need to have been claiming your benefits for a period of at least 26 weeks with no break of more than 28 days.

Can you Get a Budgeting Loan?

As mentioned above, it’s only possible to get a budgeting loan if you are receiving pension credit, jobseeker’s allowance, employment and support allowance, or income support on the day that you apply for the loan. You will also need to be receiving your benefits on the day that a decision is made regarding your loan.

If you are claiming universal credit, you will only be able to get a budgeting loan if your earnings are less than £2,600 over the previous six months before you applied for the loan. The amount cap can go up to £3,600 in total for a couple applying for budgeting loans.

In the case of Universal credit, any time that is spent receiving some of the other benefits that are mentioned above, before the person moved onto universal credit, will count towards the amount of time that the individual must be receiving benefits before they can apply for a budget loan. Additionally, to help maintain all work incentives, the requirement will not apply if the expense that the budgeting advance is needed for is to keep or get employment.

Budgeting Loans Savings Limits

It will not be possible for any person to be given a full budgeting loan if they, or their partner has more than £1,000 in their savings. The amount can be enhanced to £2,000 for couples who are over 62 years of age. For a budgeting advance, the same rules regarding savings apply. A decision will be made on whether or not you can have a budgeting loan or advance by looking at your individual circumstances, any existing advances you owe, your savings, your ability to repay the loan, and more.

It’s also worth noting that there are three different rates that can be used to determine how much of a budgeting loan or advance you will be given. These rates depend on whether you are applying as a single person, a couple without children, or a person with children. If you are single, the maximum amount you can borrow is £348, if you are a couple, that amount increases to £464, and if you have children, the amount is £812.

The minimum amount of loan or advance that you can get is £100, and you will not be able to apply for more than you can reasonably afford to repay.
Remember, if you are given a budgeting advance or loan, you will need to pay back the money that you borrow, but you will not be required to pay back any interest on the loan. Usually, you’ll need to repay the full amount within two years, but most people repay within one year.

Benefit Caps and Budgeting Loans

A budgeting advance or loan is not included within the benefit cap, which is used to limit the total amount of certain benefits that people of working-age are eligible to receive. Your budgeting loan will be directly paid into your building society, bank account, or post office account through simple payments. Importantly, your budgeting advance or loan will not count as income, so it will not have an impact on the other benefits you can get.

When you are applying for a budgeting loan or advance, you will not need to say exactly what you want to purchase with the money, or why you want to buy it. However, you will need to give details as to the category that you want to use the expenses for, such as to maintain a job, etc. You will also need to state how much money you need.

You will need to give your national insurance number when applying for your budgeting loan or advance, and you will also have to give details of who else is living with you, including children and your partner. Information may be needed regarding your current debt and savings, and your application will be treated as if it was made on the same day it was received by the DWP. If your application wasn’t complete, your application will still be treat as though it was made on the day it was first received.