An illustrative case study of how Drake Mortgages assesses secured borrowing options under MCOB and the Consumer Duty before identifying a second charge mortgage as the suitable route.
The Client
The client, a homeowner in his mid-forties, approached Drake Mortgages wanting to raise approximately £95,000 to fund a home improvement project, a single-storey rear extension and a full kitchen refurbishment.
He had held his current residential mortgage for several years and was part-way through a fixed-rate deal at 1.8%, with around £185,000 outstanding. The property was worth substantially more, leaving him with comfortable equity to support the additional borrowing.
The Objective
The client’s priority was clear: raise the funds he needed for the works while protecting the exceptionally low 1.8% rate on his existing mortgage.
Any solution that disturbed that rate would materially increase his monthly cost of borrowing, so preserving it was central to what he was trying to achieve.
How We Assessed His Options
Under MCOB and the Consumer Duty, we are required to consider all appropriate alternatives before additional secured borrowing can be identified as suitable.
We worked through the standard hierarchy of options with the client.
| Option | Considered | Outcome |
| Further advance | Yes | Declined by the existing lender. The borrowing was outside its further-advance policy, as the funds were for structural extension works and the lender would not release additional lending until completion and re-inspection. |
| Remortgage | Yes | Not cost-effective. A full remortgage would mean surrendering the 1.8% fixed rate and re-borrowing the entire balance at current market rates, sharply increasing the monthly cost on the whole loan. |
| Second charge mortgage | Yes | Identified as the suitable route. The additional funds could be raised alongside the existing mortgage, leaving the 1.8% first-charge rate fully intact. |
Step 1 – Can the Existing Lender Offer a Further Advance?
We first approached the position of a further advance from the client’s existing lender, as this is the most straightforward way to borrow more against a property.
In this case the lender declined the additional borrowing. Its further-advance policy did not permit lending for structural extension works while they were in progress; the lender would only consider releasing funds after the works were complete and the property had been re-inspected and revalued.
That left the client unable to fund the project when he actually needed the money, at the outset. A further advance was therefore unsuitable for his objective.
Step 2 – Would a Remortgage Be Suitable?
We then assessed a full remortgage. On paper a remortgage can consolidate borrowing into a single loan, but here it carried a clear financial disadvantage.
To raise the additional £95,000 by remortgaging, the client would have had to move his entire £185,000 balance onto a new deal, giving up the 1.8% fixed rate in the process. Re-borrowing the whole balance at prevailing market rates would have increased the monthly cost across the full mortgage, not just the new money, a materially more expensive outcome.
Remortgaging was therefore not the most cost-effective solution.
Step 3 – Why a Second Charge Mortgage Was the Right Choice
With a further advance unavailable and a remortgage financially disadvantageous, a second charge mortgage became the appropriate route.
A second charge is a separate secured loan taken out alongside the existing mortgage, allowing the client to keep his current deal untouched while raising the funds he needed. It met his objective directly:
- His existing lender could not offer a further advance.
- Remortgaging would have caused a financial loss by triggering the loss of his 1.8% rate.
- The second charge protected his low first-charge rate entirely, with the new borrowing sitting behind it.
- It allowed the funds to be raised at the point of need rather than after the works were complete.
Identifying the Right Route
Having worked through the alternatives, Drake Mortgages identified a second charge mortgage as the suitable route for the client’s circumstances.
Our role at this stage is to assess the options against MCOB and the Consumer Duty and to establish which form of secured borrowing genuinely fits the client’s objective, which here was raising the funds while preserving the 1.8% rate.
Read more: What are second charge loans?
Referral to a Specialist
Drake Mortgages does not provide second charge mortgage advice directly.
Once the second charge route was identified as suitable, the case was referred to an FCA-regulated second charge specialist, a master broker with access to the second charge lender market.
The master broker carries out the formal advice and recommendation, sources the facility, and completes the affordability, credit and suitability assessments, with full disclosure provided through an ESIS (European Standardised Information Sheet).
The Outcome
The client was able to raise the £95,000 he needed for his extension and kitchen refurbishment through a second charge mortgage, while his existing 1.8% residential mortgage continued undisturbed.
He funded his home improvements at the point he needed the money, avoided the increased cost that a full remortgage would have brought, and kept the benefit of a fixed rate that would have been impossible to replace in the current market.
This case study is illustrative. Client details, figures and circumstances have been anonymised and adjusted for confidentiality and do not represent a specific named individual.
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