Why second charges deserve a place in your buy-to-let toolkit

Landlords are in a bit of a bind at the moment.

Many of them could be sitting on strong equity, solid rental yields, and a long list of things they want to do, such as refurbish a flat, add another property or sort out rising costs. But when it comes to actually raising the funds, things may get tricky. Many could be locked into reasonable fixed rates they don’t want to lose, or they’ve got a complex portfolio that would be a challenge to remortgage.

What they, and perhaps some brokers, don’t realise is that there’s another route in the form of a second charge loan. It’s not new, it’s not niche, but it could be the thing that gets a complex case moving.

More common than you’d think

Thankfully, we’re seeing a positive shift in the number of brokers asking questions about second charges. Sometimes it’s a client-led enquiry, for example, someone wanting to borrow for a refurb but unsure how to do it without touching the main mortgage. On the other hand, it could be a broker trying to problem-solve a case where a remortgage doesn’t work.

And it’s not just anecdotal. According to the Finance & Leasing Association (FLA), second charge mortgage volumes rose by 15% in April compared to the year before. It’s part of a wider pattern, with more and more landlords looking for flexible ways to raise funds that don’t involve pulling apart a perfectly good mortgage.

The stumbling block is understanding

For many brokers, second charges, particularly on buy-to-lets, still sit in the “too complicated” box, and I totally get that. After all, affordability is harder to assess, property types do vary, and the lending landscape is less familiar.

One of the biggest surprises is loan to value. It’s not unusual to see 80%, 85% or even 90% LTVs available on a second charge buy-to-let loan. At Norton, we’re currently able to support BTL secured loans up to 100% LTV in some cases, typically up to £30,000. That means landlords can release equity without touching the first charge, even where capital needs are significant.

I speak to brokers every week who assume second charges top out at 60% or 70%, and rule them out before properly exploring the options. The room for flexibility is often far greater than they expect.

There’s also the widespread belief that second charges are mainly for debt consolidation or emergency borrowing. In reality, we’re seeing them used for everything from refurbishment funding to raising a deposit for a future purchase.

Affordability: harder but manageable

There’s no sugar-coating it, affordability remains one of the most challenging aspects when placing second charge buy-to-let cases. Each lender approaches it differently. Depending on how the property is held, whether individually, through a limited company, or as part of a portfolio, the income assessment can vary.

But that’s exactly why brokers shouldn’t try to go it alone. We work with advisers on the placement, packaging and lender communications from day one. We don’t expect brokers to know every detail of specialist criteria, and that’s why we’re on hand to help them work through it. And when the deal’s got moving parts or unusual elements, we’ll collaborate to find a lender that fits.

It’s not uncommon for landlords to run into problems with rigid criteria or portfolio caps. A second charge could let you work around such rigidity or limitations without undoing what already works. It’s a way to move forward, not start from the beginning.

Landlords are still looking to invest

There’s been a lot of noise about landlords exiting the market, but from what I’m seeing, plenty are still buying, upgrading or restructuring. FCA data shows buy-to-let remortgaging fell by nearly 19% year on year in Q1, but further advances went up. That says a lot. Landlords are still borrowing. They’re just doing it more carefully.

Even so, second charges still don’t come up in conversation as often as they should. We speak to brokers all the time who say their clients simply haven’t heard of it as an option. That’s not unusual. It’s just not something most landlords think about, until a broker puts it on the table.

Second charge loans on buy-to-lets aren’t right for every client. They can be harder to place, and they’re not a fix-all, but they are a valid and often overlooked solution that could help more landlord clients than you might think.