What Documents Do I Need To Get A Second Mortgage?
There are several items that lenders will expect you to provide when applying for a secured loan, second charge or second charge mortgage.
It is recommended that you use a qualified mortgage broker who will be able to establish the best lender for your needs and know exactly what paperwork you will be expected to provide for that particular lender.
One of the items required relates to proof of your address to make sure they are credit searching the correct address for confirmation of your current credit commitments and your credit score. Your credit history is an important factor for a second charge mortgage.
Also, they require proof of your income to make sure you can afford the second mortgage. While you might think a second mortgage is a good idea for you, the lender must be confident that you will be able to make the repayments and you that have the required equity in your property.
Should you not be able to make all repayments then as a last resort the lender could take possession of your property as the loan is secured against the equity in your home.
Proof Of Address
All lenders will require at least 3 years address history from you. They need to satisfy themselves that you live where you say you live. One of the reasons for this is that they will want to carry out a credit search and need to know the address they are searching for is the address that you live at.
Most are happy to do a Voters Roll check to see that you have resided at your current address for the last three years. If the Voters Roll register only shows you as living at your current address for one year, then the lender will want to know where you lived for the 2 previous years. They would expect you to provide bank statements or utility bills addressed to you at your previous address for 2 years.
Proof of Income For Employed Applicants
If you are employed, then the lender would normally want to see your 3 most recent wage slips for their affordability checks. In addition, if you receive over time or bonuses, they may require sight of your most recent P60 to see what your overtime or bonuses total over a 12-month period.
Lenders will only consider your current income if you are employed. While your employer may have told you that you will be receiving a salary increase in say 3 months’ time, any lender would only work to your current income and ignore the proposed increase. If you needed to work to the increased income to satisfy the lenders income criteria, you would have to wait until your salary increased and provide a wage slip to show your income had increased.
Generally, lenders will expect you to have completed any probation period. Some however are prepared to consider applicants still in probation who have moved from one company to another company in the same sector. It’s likely that they’ve moved to a higher paid job and will stay with the new company because they are familiar with the type of work.
You also find that some employers are happy to waive the probation period if they think it will assist their employee in obtaining a loan.
Evidence Of Income For Self-Employed Applicants
Depending on lender criteria, self-employed applicants are expected to provide two years accounts, or request their accountant to complete a certificate that covers the last three years trading figures.
Some lenders will consider using your “projected” income when assessing whether or not you can afford the proposed loan. This is the income you are forecast to make over a 12-month period. It might be that the first 8 months of the current year have been much stronger financially than the two previous years. If your accountant can confirm that he has seen bank statements and future contracts to justify an increased income, then the lender will consider using the higher “projected” income when assessing your application.
Your accountant must be suitably qualified, and lenders provide a comprehensive list of acceptable qualifications.
Buy To Let Property Income
Lenders will take into account any rental income you might be receiving from BTL properties. Some will require sight of the assured shorthold tenancy agreement (AST) and a bank statement showing the monthly rental income being received on all your buy to let mortgages, while others are happy to accept your latest SA302.
Some lenders will also take into account any income you might receive from other additional properties such as a holiday home.
Proof Of Signature
Any lender needs to be satisfied that anyone applying for a loan is who they say they are. They need to prove their identity. To do this they require your broker to see an original passport or driving licence and certify to say that they’ve seen the original of the document.
As technology advances some lenders are now able to satisfy their ID requirements by using face recognition apps.
In all instances, you will be required to complete a detailed application form and direct debit.
There are a number of other documents that may be required depending on the circumstances of the application including a death certificate, marriage certificate or papers relating to divorce.
It is recommended that you send important items such as passports, by special delivery or an equivalent service to ensure these important documents are not mislaid in the postal system.
For people looking to borrow larger amounts, say £100,000 plus, they may be required to obtain independent legal advice so that the lender knows that any potential borrowers fully understand the implications of them taking out a charge on their existing property and potentially losing their home. In addition, the advice would make them fully aware of the terms and conditions including if they were to incur an early repayment charge if they were to settle the loan before the end of the term.
You will be required to sign an authority addressed to your existing mortgage company asking them to provide information to your mortgage broker. In some instances, there is a “restriction” registered at Land Registry meaning that your mortgage lender needs to grant permission or consent in favour of the lender who is granting your second mortgage.
Your broker will confirm the loan size, loan term, interest rate, purpose, and monthly repayment to your mortgage company to see if they consent to the proposed second mortgage. In most instances, they do agree to the second mortgage being registered.
Return Items Quickly
To complete your application as quickly as possible it is recommended that you return all items as quickly as possible to your broker. Some people tend to return most items with other paperwork to follow.
It might be that the items to follow are the most important in order to progress the application and that the application will standstill until all items are received by your broker.
What Happens If My Application Is Declined?
In some situations, an application might be declined by a lender. This could be as a result of a number of things including your wage slips not backing up the income declared on the application form. If this happens your broker will look at other lenders who might be able to assist you. It's likely that the terms offered are not as attractive as the previous terms offered so you will need to consider if they meet your needs.
In this situation, it is likely that you will have to complete another set of forms for the new lender.
In addition, if the first mortgagee on your residential mortgage has registered a restriction at land registry the broker will need to reapply for consent on behalf on the new lender. This is likely to delay the application as it normally takes 10 - 14 working days to get consent from your first mortgage company. To expedite the process, it is recommended that you telephone your mortgage company and request them to process the request as quickly as possible.