Specialist lending has come much more to the fore in recent years following the arrival of the EU's Mortgage Credit Directive and the regulation of second charge mortgages by the Financial Conduct Authority. 

There is more demand for second charge mortgages as homeowners try to take advantage of rising equity in their homes, and elsewhere demand is still strong for buy-to-let mortgages, although it is forecast to be less this year than in previous years, due to tax changes.

However, as a consequence, there has been an increase in the number of landlords making buy-to-let investments in a limited company rather than in their personal name, because of the tax changes mentioned above.

This involves a more complicated procedure meaning the setting up of a special purpose vehicle, designed solely for the use of owning property. The borrower deposits funds into the limited company and arranges lending to it, allowing the company to purchase property.

The second charge mortgage market has seen changes as well, with master brokers changing their fee structures, opting for flat fees instead, akin to the fees asked of first charge mortgages, rather than the more expensive variety usually demanded of second charge loans.

There are new products available for those wanting to get a second charge mortgage, with a number of lenders offering LTVs of above 75 per cent.

Other forms of specialist lending relate to the development of property by professional developers. There are a number of options available that release money at various stages through the development cycle, and cater for changes that may occur and mishaps along the way.

Lenders look to finance development with loan-to-cost ratios which involves totalling the overall cost of the project and allowing a loan directly against this figure. This can vary from 55 per cent to 85 per cent, with an end value parameter to ensure the project is not overfunded.

Specialist lending has become an increasingly frequent constituent of clients’ requests, so it is important for mortgage advisers to be prepared. 

In the following pages we set out some aspects of specialist lending that may be requested by clients.

Melanie Tringham is features editor of Financial Adviser