Second charge bridging loans: how they work and who offers them

A second charge bridging loan is a short-term loan secured on a property that already has a mortgage or other loan registered against it. The new lender takes a second charge, ranking behind the existing first charge, and the first mortgage carries on as before.

HM Land Registry’s practice guide explains that registered charges rank between themselves in the order they are entered on the register, unless the register says otherwise. So if the property is sold, the first charge holder is repaid in full before the second charge lender receives anything. That ordering drives everything else about a second charge: the lower loan-to-value limits, the higher risk to the lender and the need for the first lender’s agreement.

Bridging itself is short-term, property-secured lending repaid from a sale or refinance. Our guide to bridging loans covers how bridging works in general; this page is about the second charge version and the lenders that offer it.

A first charge bridge suits a property with no mortgage, or a deal where the bridge clears the mortgage. A second charge suits a borrower who wants to keep an existing mortgage, perhaps because it has a good rate or an early repayment charge, and raise money from the equity above it. Our explainer on loan to value shows how lenders work out the equity available.

Because the first lender’s security is affected, and most mortgage terms require the borrower to ask before granting another charge. Second charge lenders build this into their process. Credit4, for example, lists consent from any first charge holder as a step before the charge is registered and funds are released on its property-secured business loan.

• Ask your current lender early whether it will consent, and how long it takes.
• Expect it to look at the combined borrowing against the property.
• Check whether your mortgage terms carry a fee or condition for consent.

1. Whether the lender takes second charges at all, and on which property types.
2. The loan-to-value limit for second charges, which is usually lower than its first charge limit.
3. Minimum and maximum loan size. Some lenders start at £25,000; others at £100,000.
4. Term, and whether interest is paid monthly or retained.
5. All fees: arrangement, valuation, legal and any exit fee.
6. The exit: how you will repay, and whether the lender accepts that route.

Our guide to comparing bridging loans explains how to set offers side by side on total cost.

Three lenders in the Capzy lender directory publish a dedicated second charge bridging product. They are listed alphabetically with their published terms.

Five more publish bridging that can be secured by a first or a second charge:

• Affirmative Finance says its loans can be secured by a first or second charge, and that second charge loans typically have lower loan-to-value ratios.
• Mint Property Finance accepts second charges behind a UK Finance member’s first charge.
• MS Lending Group describes first and second charge commercial bridging, up to £3m, often to 75% LTV.
• MT Finance has a dedicated second charge bridging product up to 65% LTV on residential and semi-commercial property, regulated over up to 12 months or unregulated over up to 24.
• Reward Funding lends up to £5 million against residential or commercial property on a first or second charge basis.
• Rocket Bridging lends from £25,000 with no stated maximum on second charges, to 65% LTV residential and 55% commercial, and says it does not take second charges on land.
• Somo gives up to 70% LTV for second charge loans in its FAQ.
• Westwood Capital Finance lends £100,000 to £2,000,000 over 3 to 24 months on a first or second legal charge.

Glenhawk also lists second charge bridging among its loan types, with minimum loans from £250,000, but its published product terms do not set out a separate second charge limit.

If you want a longer-term loan rather than a bridge, Together publishes second charge secured business loans of £50,000 to £1 million.

It depends on the property and the borrower, not on the charge’s ranking. Under article 61(3)(a) of the Regulated Activities Order, a loan to an individual or trustees secured on land counts as a regulated mortgage contract when at least 40% of the land is used, or intended to be used, as or in connection with a dwelling, unless an exclusion in article 61A applies. The definition makes no distinction between a first and a second charge.

So a second charge bridge on your own home is normally regulated, while one on a company-owned commercial or investment property is not. Lenders publish separate products for each: MT Finance offers regulated bridging for homeowners, and Glenhawk describes its regulated bridging as an FCA-regulated loan secured on the borrower’s home. Our guide to regulated bridging loan lenders covers that market.

Expect interest, an arrangement fee, a valuation and legal costs for both sides, and sometimes an exit fee. Few lenders publish rates, because pricing depends on the property, the loan-to-value and the exit. Ask each lender for the total amount repayable over the term you expect to need.

If the borrower is a company, the charge it gives must also be registered at Companies House. GOV.UK says that if a charge is not registered within 21 days, it may be difficult to recover the debt if the company becomes insolvent, so lenders will insist on it.

Capzy is a credit broker, not a lender, and is paid by the lender. You can check your options with a soft search that does not affect your credit score; a lender’s full application may use a hard search. Our guide on how to get a bridging loan walks through the application.