What Is A First Charge On A Property?
A first charge is the senior secured claim over a property. If the property is sold or repossessed, the first charge holder is repaid in full before any other secured lender receives anything.
Charges are registered at HM Land Registry and rank in order of priority: first, second, third, and so on. That ranking is the single biggest driver of how a secured facility is priced.
First Charge vs Second Charge
A second charge sits behind the first. In a shortfall the second charge holder may recover part of what is owed, or nothing at all — so second charge lending is priced considerably higher, and the loan to value available is usually lower.
Worked Example
- Property sells for £600,000
- First charge lender is owed £500,000 — repaid in full
- Second charge lender is owed £150,000 — receives £100,000, leaving a £50,000 shortfall
The order matters entirely. Same property, same sale, very different outcomes.
Where It Comes Up In Commercial Finance
- Bridging finance is commonly available on either a first or second charge basis, with second charge priced higher
- Raising capital against a property you already have a mortgage on generally means a second charge, unless you refinance the whole thing
- A second charge usually requires the first charge holder’s consent, and some lenders simply refuse it. That consent can take weeks, so factor it into any timetable
Note the distinction from a debenture, which creates charges over a company’s assets rather than over a specific property. A business can have both.
Read more about commercial mortgages and bridging loans, or get in touch.
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