Second charge bridging loans

A second charge bridging loan is a short-term loan secured on a property that already has a mortgage. The new lender ranks second, behind the existing lender, so if the property is sold the first mortgage is repaid before the bridge. It lets an owner raise short-term funds without repaying or changing the existing mortgage.

Second charge bridges are used to raise a deposit for another purchase, fund works, pay a tax bill or settle a business need while a longer-term solution is arranged. They are repaid by a sale, a refinance or another source of funds. Longer-term borrowing of this kind is covered in the second charge mortgages section.

The lender values the property, deducts the outstanding first mortgage and lends against the remaining equity, so the combined loan-to-value across both loans sets the limit. Interest is usually quoted monthly and is often rolled up or retained, so there are no monthly payments on the bridge during the term.

The legal work registers the second charge at HM Land Registry, or the equivalent in Scotland and Northern Ireland. The borrower keeps paying the first mortgage as normal. Missing payments on either loan can put the property at risk.

Often, yes. Many mortgage conditions require the borrower to ask the first-charge lender before taking further borrowing on the property, and some second charge lenders will only proceed with that consent. The existing lender may also need to agree the order in which the two loans rank, through a deed of priority.

Getting consent can add time, so it is usually requested early. If the first lender refuses, the options are to refinance the whole property with a first-charge bridge or to find a lender willing to proceed without consent where the mortgage terms allow it.

A second charge bridging loan secured on a home lived in by the borrower or a close family member has been a regulated mortgage contract since March 2016. The lender must then follow FCA rules on affordability and disclosure. A second charge bridge on an investment or commercial property is usually unregulated.

The use of the property decides the category, not the ranking of the charge. The full comparison is on the page about regulated and unregulated bridging loans. Where part of a building is a home and part is let or commercial, the lender looks at how much of the land is lived in before deciding which rules apply.

Costs include monthly interest, arrangement fees, valuation and legal fees, and sometimes exit fees. Because the lender ranks behind the first mortgage, second charge bridging is often priced higher than an equivalent first-charge bridge, and loan-to-value limits are usually lower. The overall cost depends on the equity, the term and the exit.

Comparing the cost of a second charge bridge with refinancing the existing mortgage helps, because early repayment charges on the first loan can change the picture. Bridging loan brokers can compare lenders that offer second charge bridging.