How second charge mortgages service customers with multiple income streams


September 23, 2021


Marcus Taylor

With an ever-changing job environment, our BDM, Tom Whitney, looks at how second charge mortgages can work for people with multiple incomes.

When Covid-19 forced the UK into lockdown in March 2020, it transformed the way people work overnight. Millions of people were forced to reckon with the term “furlough”, and adapt to very constrained financial habits, and many did so successfully. However, working during the pandemic wasn’t positive for everyone. Many self-employed workers had to find employed work outside of their sectors in the absence of regular income from their businesses, finding it difficult when government support didn’t apply or couldn’t be offered.

However, there was a dramatic increase with employed workers turning to self-employment to boost their income during the furlough scheme. Side hustles, passion projects and newer smaller businesses cropped up in local communities across the UK, with the Financial Times reporting a 30% increase in small business incorporations during December 2020. With so many people diversifying their income streams, it was a time to be thrifty.

As a key player in the second charge specialist lending sector, we knew that these wide-scale changes in circumstances and income streams shouldn’t be a barrier to accessing the right type of funding for homeownership. We knew we had the products that could make the second charge market more approachable to those looking for solutions to their financial problems.

Borrowing that caters for everyone

The rollout of our new products was born out of changing consumer demands, while many faced brand-new, lockdown-induced financial circumstances. In April, we introduced a new suite of products that are designed to target underserved areas of the market. These include newly self-employed applicants with limited trading history, day rate contractors, zero hours and agency workers.

These products allow individuals access to low-cost, flexible funding solutions without affecting their first charge mortgage. They also offer an alternative to first charge criteria constraints that may restrict applicants who have multiple income streams.

As well as catering to a wide range of circumstances, second charges are diverse in how they can be used. Home improvements, debt consolidation and business purposes are all common reasons listed for borrowing. Second charges are also often used to purchase buy-to-lets and holiday homes to give applicants additional sources of income.

In the case of the latter, as discussed in last month’s Optimum Insights, second charges can be used to build a BTL portfolio without affecting attractive first charge products.

Securing a second charge loan

While the majority of second charge lenders do cater for customers with changes in circumstances and credit ratings, each lender sets its own criteria. For example, at Optimum, we consider using 100% of bonus, overtime and commission, providing the customer has a 12-month track record.

We also use 100% of second jobs providing the applicant has been in both roles for at least 12 months and the hours are realistic and sustainable. Some lenders, however, will restrict their criteria around these factors.

Because of this, you should always consider using a broker. Regardless of your situation, brokers can help you access lenders you won’t easily find with a Google search.

Our broker partners all have long-standing relationships with second charge lenders and this ensures they are kept up to date with lending criteria, allowing them to make informed decisions on the best product for your needs. A list of our registered introducers can be found on our website.

With the Covid-19 pandemic changing the way we work, perhaps permanently, the second charge sector must evolve in kind. We’ll continue to place financial inclusion at the core of our business offering to ensure that more customers can access the type of finance they need without being affected by generalised criteria.

To discuss your customer’s second charge mortgage needs or to become an official broker partner of Optimum Credit, contact Tom Whitney via his LinkedIn, and don’t forget to follow our parent company Pepper Money UK on LinkedIn and Twitter.

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