Lets discuss what a second charge bridging loan is, how they work and how to apply. Second charge bridging loans allow you to lend money against a property which already has a mortgage on. Provided there is enough equity available, a 2nd charge will sit behind the 1st charge holder (mortgage).
This is a short term type of finance, allowing you to get quick access to funds without refinancing your existing mortgage or secured loan. Terms can be as short as 1 month or up to 24 months.
You can raise money for a variety of purposes such as to use for business and commercial purposes, to invest in property or bridge the gap between a sale and purchase.
What Is A Second Charge Bridging Loan?
Lets first discuss what a second charge means. When you take out a mortgage a charge is registered with land registry, noting the mortgage holders interest over the security. That would be a first charge.
With a second charge, a secondary lender places a charge on the property and would need to be repaid upon sale of the property after the first charge holder. This allows you to use equity in the property as security to borrow money as a bridging loan.
Therefore a second charge bridging loan is a short term type of finance. Allowing you quick access to money by using equity in an property that already has a mortgage on. Example below.
2nd Charge Bridging Worked Example
Property Value: £500,000
Existing Mortgage £150,000
Maximum Second Charge Loan Calculation
70% LTV: £500,000 x 70% = £350,000
Minus Existing Mortgage: £350,000 – £150,000 = £200,000
Maximum Gross Loan: £200,000
Net loan subject to any applicable fees and interest deductions. Please get in touch for an exact quote.
What Property Can You Use As Security?
Most types of property can be used as security, including BTL, Commercial and your own home.
- Residential Buy To Let Property
- Main Residential Home (Occupied By You and/or family)
- Commercial Property
- Land & Developments
Key Features Of 2nd Charge Bridging Loans
Features can vary between different finance providers but here are some of the key points. Subject to underwriting and circumstances.
- LTV up to 80%
- Loans from £25k+
- Secured against home/main residence or Buy To Let
- 1 month min – 24 month
- Quick Access To Funds
- Valuation Only Lending Available
- Adverse credit, CCJs and arrears accepted
- Business & Commercial Purposes
- Used For Property Investment
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Different Types Of Second Charge Bridging Loans
There are a number of different types of second charge loans available. Depending on the purpose of the loan and the property security you wish to use.
You could use the equity in your main residential home, a buy to let property or a commercial property. In each case there must be enough equity still available after you deduct the first charge holder (mortgage).
Second Charge Business Loan
You can use the equity in a property to secure funds for any business and commercial purposes. This could be a short term bridging loan or a longer term secured business loan.
Funds can be paid out as quickly as 2-3 weeks for a variety of business uses, such as for cashflow, stock purchases and buying commercial premises.
Second Charge Bridging Loan Secured Against Main Residence
If you have sufficient equity in your main residential home, this could be used as security for a loan. This could be a way to raise funds quickly for your business, where you have a clear exit plan to repay within 1-24 months. You can also keep your existing residential mortgage in place.
Important: Your home could be at risk of repossession if you do not make the required repayments on time.
Equitable Charge Bridging Loans
With standard second charge bridging loans, permission must be granted by the first charge holder (usually mortgage company). If permission is not available or has been denied, an equitable charge bridging loan may still be possible.
An equitable charge can be registered without permission from the first charge holder. This can allow you to still use the equity in your property as security, even without the 1st charge holders explicit permission.
Apply For A Second Charge Bridging Loan
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To apply for a 2nd charge bridging loan, fill in the form below.
One of our expert brokers will be in touch straight away.