Many of these loans offer discounted rates to borrowers with properties that have an EPC rating of between A and C, therefore landlords with less efficient properties do not qualify.
While there are a few providers which offer green loans to borrowers who pledge to make their homes more efficient, they are only suitable for those who have the cash to make those improvements.
By releasing equity via a second charge, a landlord can release the money they need to make the home improvements and, as a bonus, should qualify for a discounted green first-charge deal further down the line.
At a time when many of us are feeling the pinch due to the rapidly rising cost of living, I’m sure any discount – no matter how small – would be welcomed.
Use green seconds to upgrade the rest of the portfolio
While there are many lenders offering green first charge mortgages, there are currently just a handful, including West One, offering green second charge loans.
However, the ones that do exist tend to mirror those of their first charge counterparts: by offering a discounted rate for borrowers with properties that have an EPC of A-C.
If you have a landlord client that has a few properties with an EPC of A-C, they can borrow against those using a green second charge – and benefitting from the discounted rates they offer – to upgrade the properties that don’t meet that criteria. That discount will effectively make the upgrades cheaper.
Often, lenders also pledge to donate to green causes for every loan that completes. At West One, for example, we have pledged to offset one tonne of carbon for every 10 second charge completions and to donate to sustainable overseas development projects.
Flexible and competitive
There are many misconceptions about second charges, one of the main ones being that they are expensive.
While second charges do carry slightly higher rates than first charge loans, they are still highly competitive, with buy-to-let seconds around the 6-7% mark in plentiful supply.
Another major advantage of taking out a second charge is that the underwriting process is typically far less arduous than a mainstream mortgage.
Some lenders, such as West One for example, don’t credit score borrowers. Instead, affordability is determined by taking into account the rent received and the original first charge.
It means, therefore, that application to offer times are usually measured in days, rather than weeks.
Seconds can also be incredibly flexible, with terms available from three to 25 years in most cases, while interest-only options are also available.
The untapped resource
The misconceptions surrounding second charges mean many landlords are not aware of the benefits they offer.
However, for borrowers who need to access cash quickly at a competitive rate and who prize flexibility, they can be a great choice.
If your clients are worried about how they will pay to upgrade their homes to meet the Government’s incoming legislation, then they are worthy of consideration at the very least.
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