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Second charge lending – the lesser known finance solution

Shawbrook highlights the value of this funding line to often marginalised customer groups like the self-employed.


With an ever-increasing number of self-employed individuals in the UK, (the Office of National Statistics has quoted a pool of 4.92m), there is certainly a need for lenders to ensure they are offering solutions to these customers that do not typically fit the ‘tick box underwriting approach’ favoured by the high street.

It is important to understand how these customers trade and have the confidence to support them with finance that is fit for purpose without automatically jumping into a remortgage. The most common problem for a self-employed applicant is only having one year of accounts, as many lenders will require at least two or perhaps three years. Another significant challenge can be where there are large upward fluctuations in income which add to the complexity of what should essentially be a simple process. Bearing this in mind Shawbrook look to take a common sense approach and can assist self-employed applicants who have been trading for just 12 months, fully aware that on occasion you may have self-employed customers whose income fluctuates. As long as this is viewed through the lens of responsible lending, lenders should look to support this important demographic of the UK economy, giving them the tools to build and grow.

Understanding the value of a second charge loan for a potential myriad of purposes is also crucial, and this type of funding should feature as a key string to the professional intermediaries bow when looking to serve applicants with an unconventional profile. Following a recently revamped second charge mortgage offering, Shawbrook Bank was able to help a couple raise funds of £407,830 on their existing residential property so that they could be in a position to purchase a second property to redevelop.

The client’s income was complex including a mixture of self-employed income along with a rental income from their portfolio, and required the underwriter to work very closely with the specialist lender’s broker partner Y3S. Shawbrook’s brokers benefit from direct access and open communication with the underwriting team which helps the team to quickly get to grips with the requirements of the case, working together to ensure a swift resolution to any unforeseen problems to meet the client’s requirements.

In this case, the client was looking to refurbish the property with a large dividend payment from their Limited Company, so further due diligence was necessary to ensure this was possible and would not affect the ongoing performance of the business. There were many moving parts to this case, but the BDM, broker and underwriting team combined efficiently to allow the full pack to come in swiftly. A ‘Full Mortgage Offer’ was sent to the client with completion following within weeks.

This case demonstrates that flexibility of approach and a willingness to adapt is crucial when lending in this space. With the support of the broker Shawbrook go to great lengths to develop a deep understanding of their self-employed customers, and with the underwriting team applying a simple and practical approach, the probability of a great customer outcome is dramatically increased.

What this case also demonstrates is that a knowledgeable and professional broker like Y3S is a vital component on any successful application. Guidance such as this is invaluable in order for customers to successfully navigate the product landscape, and with the limited options available to self-employed applicants a second charge should be a considered as a viable alternative to a remortgage in many circumstances.

Matt Cottle, Chief Executive Officer of Specialist Mortgage Group comments;

“This is the first case Y3S has completed with Shawbrook in several years. Our adviser worked closely with the underwriters at Shawbrook to deliver the correct solution that fitted our client’s needs. Shawbrook went to great lengths to ensure that the process was pain free and the clients are delighted.”

Caroline Mirakian, Head of Intermediary Distribution at Shawbrook Bank adds;

“Working with broker partners the calibre of Y3S is critical in these more complex cases and I’m delighted that we have been able to support with this large second charge loan and look forward to working with many more partners.”