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Are Second Charge Mortgages Regulated?

There are new rules regarding second charge mortgages - find out what they are here.

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 27th March 2020 *

We’re inundated with enquiries from homeowners wanting to know more about second charge mortgages, and in particular, what are the new regulations that have recently been introduced and how it will affect them.

The good news is that the specialist brokers we work with are experts when it comes to the FCA regulations on second charge mortgages.

In this article, we cover the most common questions such as -

If you’re still unsure or have some questions, you can arrange a free, no obligation chat with one of the advisors we work with here. They are experts when it comes to second charge mortgages and can offer you the right advice.

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Are second charge mortgages regulated?

Normally, yes. The FCA (Financial Conduct Authority) has conducted a second charge mortgage review. This resulted in the drafting of a new set of rules that lenders must abide by.  These are the mortgage credit directive (MCD) second charge rules.

Possible exceptions to this rule exist. If a buy-to-let property was purchased purely as an investment with no intention of living in it then it falls into the “non-regulated" category. As a result, second charge mortgages raised against these types of properties would fall into this same category.

What are the MCD second charge mortgage rules?

For instance, mortgage providers are now expected to perform a detailed assessment to ensure you meet the affordability criteria.

They are also required to assist any customers who experience financial difficulty meeting repayments in such a way that their individual circumstances are considered.

What are the new second charge mortgage rules?

Second charge loans were regulated quite recently and we’re often asked ‘Under what rules are second charge loans now regulated?’ The basics are explained above, but lenders now have to meet some new requirements in order to comply with the latest rules. These include -

  • They must provide an adequate explanation of the product’s features.
  • They need to provide a binding offer.
  • They must provide a minimum 7 day ‘cooling off’ period.
  • Customers must be provided with a European Standardised Information Sheet (ESIS) disclosure document.

When did second charge mortgages become regulated by the FCA?

The new regulations were introduced as part of the Mortgage Creative Directive in March 2016. So second charge mortgages are regulated from that date.

What are MCOB second charge loans?

Second charge mortgage MCOB (Mortgages & Home Finance: Conduct of Business) rules were issued to lenders and mortgage providers at the same time.

Essentially, a lender or mortgage provider cannot offer a financial transaction, such as a new or second mortgage, or a variation in a loan or mortgage that involves increased borrowing, unless it can demonstrate that the customer can afford the repayments.

Lenders need to consider -

  • Verifying the customer’s income ( net of tax and national insurance).
  • Determine spending - both committed spending (credit cards, loans etc) and basic spending (food, utility bills etc)
  • The customer’s basic household quality of living costs.

Speak to a second charge mortgage expert

Before you consider taking out a second charge mortgage, it’s essential that you get the best possible advice, so call Online Mortgage Advisor today on 0808 189 2301 or make an enquiry here.

The brokers we work with are specialists in their field and every one of them is ‘whole of market’, that is to say that they have a working relationship with just about every lender, not just a select few. This means they will be able to find the best deal for your particular circumstances.

In fact, our customers consistently rate us 5 stars on Feefo, primarily for the level of service and results we provide.

So just sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 27th March 2020
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

Find out more about second charge mortgages

Second Charge Mortgages