Equifinance believes affordability calculations can be of real benefit to specialist lenders when assessing second charge mortgage cases.

The secured loan provider sys that since the implementation of the Mortgage Credit Directive (MCD), the updated processes have delivered a “fresh look” at one of the most important parts of the process so they can benefit the customer, the broker and the lender.

By looking more closely at its affordability model, Equifinance have been able to lend to more customers, confident that they are able to pay now and in the future.

It also argues that when utilised sensibly, specialist second charge mortgages are often used as a step to longer term financial recovery, re-establishment of a good credit history and may in some circumstances help to prevent an ongoing spiral of debt. It is hoped that in the longer term the improved customer circumstances will provide the customer with benefits such as access to a wider range of products and release from the restrictions that a poor credit report might impose.

The implementation of MCD has meant that as a lender Equifinance establishes the precise level of net income based on the evidence provided and calculations of tax and national insurance payable on more complex cases such as director, shareholder and self-employed applicants. The customers admitted expenditure is then tested against metrics provided by the Office of National Statistics and trigger figures provided by the common financial statement to establish thresholds for average expenditure. Where there is a discrepancy then the applicant is asked to clarify the difference which in some cases proves to be entirely circumstantial.

From inception of the MCD Equifinance also supplied to all of its business partners a standard affordability calculator. The calculator is designed to assist all introducing brokers by giving them a tool that matches precisely how it calculates surplus and stressed income during the underwriting process. This helps to mitigate surprises occurring post submission of a case and therefore potential poor outcomes for customers, it argues.

Tony Marshall, managing director of Equifinance, said: “By individually assessing each case and stress testing it against future changes to rates and circumstances, we are seeing there are real benefits in closely checking the affordability of each loan. This is allowing us to work closely with the broker and their client to make quicker and more accurate lending decisions.

“MCD has opened up a new way of thinking on the detailed areas of our process map and we are now able to help even more customers as a result. Second charge mortgages are back in the frame as a lending product of choice and this will continue to grow throughout 2016 as their awareness increases.”