Second Charge Bridging Loans
We arrange lightning fast second charge bridging loans with maximum LTVs. If you need extra finance urgently - we can complete in just 72 hours!
We arrange 2nd charge bridging loans for Individuals, developers and investors to raise funds for many uses including loft conversions, extensions, renovation and refurbishment on properties that already have an outstanding mortgage or other loan.
Our Second Bridging Loan Service
- Market-leading property bridging loans from £26,000 to £250m
- Monthly interest rates from 0.75% pm
(Lower rates for £700,000+ loans or less than 50% LTV) - LTVs up to 65% (up to 100% finance if additional collateral is available)
- Automated valuation options and dual legal representation
- No monthly payments with interest rolled-up options
- Terms up to 24 months
We provide a fast reliable service to help you get the finance you need at the best available rates.
We consider all types of credit history including non-status, bad or adverse and don't perform automated credit checks so there's no footprint from enquiring.
With incredible relationships with the UK's top lenders including specialist lenders, family offices and private investors, we can source the bridging loan you require:
up to £300k loans in 3 days
up to £750k loans in 7 days
up to £250m from 14 days
Where your timeline is critical and short, we're confident we can get your bridging loan in place. Get your best no obligation quote today.
Second Charge Bridge Lending Criteria
| Loan to value (LTV) | Up to 65% maximum |
| Loan term | 1 to 24 months |
| Loan amount | £26,000 up to £50m |
| Interest options | Rolled-up, retained or serviced |
| Interest rates | From 0.75% |
| Decision | Instant decision in principle |
| Completion | Up to £300k in 3 days Up to £750k in 7 days Up to £250m from 2 weeks |
| Early repayment fees | None |
| Availability | Secured on property in England, Scotland, Wales, Northern Ireland & Europe Individuals, Companies, SPVs No credit & adverse credit considered |
| Exit strategy | Sale or refinance |
A comprehensive guide to Second Charge Bridging Loans
Second charge bridging loans are financing options for people who need fast bridging finance, usually in urgent situations.
Second charge bridging loans are also becoming a more popular option for borrowers in need an extra cash without disrupting their existing finance. Typical uses include raising additional finance for buying investment properties, completing a refurbishment or injecting cash into a business.
It's also likely to increase in homeowner use, where homeowners who are locked into favourable fixed interest rates on their mortgage products, but they still require quick access to additional money and don't want to refinance their current deal.
This type of loan provides a means to utilise other forms of property or equity to get the funding they need without the hassle of financial disadvantages of remortgaging. By taking out a second charge, the borrower is effectively using their current property as additional collateral for the loan. As such, the second charge loan is a viable option for those who need access to funds quickly and prefer a short-term loan solution.
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How can Second Charge Bridging Loans be used?
Second charge bridging loans can be used for various purposes, such as to purchase a new property, to pay off debt, to fund a business venture, to raise capital for projects or investments, to access funds for renovations or repairs, as well as for any other need.
What's the difference between a 1st charge or 2nd charge loan?
A first charge loan is typically the primary mortgage taken out by a borrower to purchase property. Second charge loans or additional loans and mortgages are separate loans taken out on the same property.
A first charge loan will always be repaid first in terms of priority should a borrower default. The first charge is usually the largest loan size with the longer loan term.
The second charge loan, however, is typically smaller with a much shorter loan term, which is normally only up to 24 months. Second charge loans also have a higher rate of interest than first charge because it is subordinate debt. Subordinate debt means they are second priority should a borrower default.
What is the process of adding a charge to property?
In order to add a second charge onto property, the borrower will need to follow the following steps:
Step 1: Find out your property's market value
The first step is to get an appraisal of the property that you intend to use as collateral to determine its current worth. To get an idea of what you might be able to borrow its a good idea to have a guide of your property's current market value. There are several websites that offer free online property valuations and these can be a useful resource to gain a truer indication of your property's value. This will only be an indicative guide.
When it comes to having your second charge underwritten by a lender, they'll either use an Automated Valuation which can significantly speed up how long it takes to obtain the loan or they'll require a surveyor to visit the property to assess it. Automated valuations are typically only available for residential properties and most land or commercial properties will require an in-person RICS assessed surveyor to complete a valuation.
Step 2: Decide how much do you want to borrow as a second charge
So, you've probably got a figure in mind already of how you want to borrow, but do you have enough equity in your property to make the numbers stack up? To understand this you'll need two figures:
Your Property's Current Market Value
Your Outstanding mortgage (or other borrowings)
You then subtract your outstanding borrowings from your property value. This tells you how much equity you currently have.
If you want to work out your loan to value then this is simple enough to do. You just need to divide the amount you still owe on your mortgage by your properties current value, then multiply that figure by 100. Or you could simply use the LTV calculator below!
LTV Calculator
Second charge lending criteria is usually no more than 65% of the remaining equity in your property.
Step 3: Find the right lender
Armed with the knowledge of your borrowing and security requirements you can now approach a broker who will be able to find several lenders who will want to finance your second charge loan.
There are many pros of using a broker but the most important is that they aim to create competition between lenders to drive down your rates as low as possible.
The broker should aim to present you at least three options with different lenders, however in some cases this may not be possible, especially if the borrower is seeking a higher than usual LTV, the property is not a straight forward 'vanilla' residential property or the applicant has significant credit worthiness issues.
Step 4: Apply to the lender
It's decision time - now you need to choose the second charge loan option that works best for your circumstances and apply to the lender. Your broker will work with you to collate all the information your lender.
Once the loan application is approved, the you'll then enter into a legal agreement with the lender. This agreement outlines the terms and conditions of the loan and will include the interest rate, repayment terms, fees, and any other pertinent information. After legal due diligence the loan is ready to be paid out.
Step 5: Pay out
Lenders call the paying out of your loan it's 'completion'. The quickest timeframe that a second charge can complete is 72 hours from initial enquiry to the borrower receiving funds.
Key features of Second Charge Bridging Loans
Second charge bridging loans generally have an interest rate of 1-2% higher than first charge mortgages, allowing the borrower to access funds faster than with a conventional loan.
These loans generally have minimum interest payments and may be repaid over a period of six months or longer, depending on the individual lender’s requirements. The loan amount may range from a modest amount to several thousand pounds. Additionally, second charge loans may have shorter repayment periods than standard loans, thereby providing access to funds more quickly.
Lending criteria for Second Charge Bridging Loans
Lenders for second charge loans may have stricter lending criteria than for general bridging loans. Applicants will need to have sufficient equity in the property at a LTV no great than 65%.
Advantages of Second Charge Bridging Loans
Second charge bridging loans can be advantageous in that they provide quick access to funds without the need to remortgage. This makes the process much faster and easier than a standard loan.
Disadvantages of Second Charge Bridging Loans
Second charge bridging loans can be expensive due to their higher interest rates and fees. Additionally, there may be limits on the amount that can be borrowed, as well as restrictions on the types of projects that the loan will cover.
It is important to look over the loan terms carefully and understand the repayment exit before agreeing to a loan. Additionally, if the borrower defaults on a second charge loan, this could negatively affect their credit score in the future as well as risk losing the property.
Loan-to-Value (LTV) for Second Charge Bridging Loans
The maximum loan-to-value (LTV) ratio for a second charge loan can vary depending on the lender. Generally, the maximum LTV is between 60-75% for this type of loan. This means that the borrower may only be able to borrow up to 3/4 of the overall value of the property that is being used as collateral.
Loan duration for Second Charge Bridging Loans
The loan duration for a second charge bridging loan can vary depending on the lender, but the loans are usually short-term solutions. The loan duration typically ranges from a few weeks to 12 months depending on the loan terms, and can even go up to 24 months.
Scenarios where Second Charge Bridging Loans might be used
In the UK, second charge bridging loans are typically used by property investors and developers to max out their borrowings to fund property development and refurbishment. But they can be used by anyone who owns a property and they're used by individuals to access funds for one-off high-value purchases. Businesses may also use them to finance a large purchase or to raise capital for expansion.
Eligibility for Second Charge Bridging Loans
In order to be eligible for a second charge bridging loan, the borrower must generally possess adequate equity in their property. Good credit history, proof of a regular source of income or rental income may be considered in some cases but it is not always required.
Timeframe for obtaining Second Charge Bridging Loans
The process and timeframe for obtaining a second charge bridging loan will depend on the lender. Generally, the process should take anywhere from a 3 days to several weeks to complete.
Information required for a Second Charge Bridging Loan application
The information required for a second charge bridging loan application may vary from lender to lender. Typically, the borrower will need to provide several pieces of information in order to apply for a bridging loan including information about the applicant, the loan details, security details, solicitors details, credit history, company / SPV details (if applicable) and accountant details.
What are the alternatives to Second Charge Bridging Loans?
There are a number of other financing options available to individuals and businesses. Some of these include personal loans, business loans, secured loans, and unsecured loans. Additionally, borrowers may be able to look into a remortgage or equity release. Each option has its own set of advantages and disadvantages that need to be considered before making a decision.
Conclusion
Second charge bridging loans can be a useful and convenient way to access funds quickly and without the need to remortgage.
They typically have higher interest rates and a shorter loan durations than 1st charge loans. It is important to consider all factors carefully before deciding to take out a second charge loan.
Additionally, borrowers should ensure that they have the capacity to repay the loan, as failure to do so could result in the loss of the property.
We're experienced financial experts who arrange fast second charge loans for property owners.
Get expert assistance today, we're on hand to answer any questions about your second charge bridging loans.
Call our friendly team on 01202 612934, we're ready to help.
Are second charge mortgages regulated?
Second charge mortgages and bridging loans on residential property which is not your primary residential property and on commercial property are not regulated by the Financial Conduct Authority. For mixed-use property, whether it's regulated or not is assessed on a case by case basis.
How does taking out a second mortgage affect your current mortgage deal?
Whether you take out a second mortgage or a bridging loan, the provider of your first mortgage has to give permission.
In most cases, there's no problem.
The only time where a first mortgage lender may stop you taking out a second charge on property is if you're in arrears with them.
Do second charge bridging loans have competitive interest rates?
The rates of interest on second charge bridging loans will be higher than on a second charge mortgage if you are a prime borrower.
For borrowers with adverse or bad credit, interest rates will still be cheaper with a second mortgage than with a bridging loan although the gap won't be as large.
It's important to bear in mind though that second mortgages are amortised. This means that, although interest rates are lower, you pay much more in interest at the start of your mortgage on each repayment. You may not be paying your mortgage down as quickly as you think you are.
It's also worth remembering that you'll pay an early settlement charge if you pay off your second mortgage early or transfer it to another lender within your lock-in period. There are no redemption penalties on most bridging loans.
Both bridging loans and second charge mortgages are forms of secured loans.
Interest rates are cheaper on these types of loan because, if you can't pay it back, your lender has the option of reselling the property to recover what's owed to them.
Unsecured borrowing like unsecured personal loans and credit cards generally attract higher rates of interest.
The interest rate you'll pay on your bridging loan will depend on how viable your lender thinks your exit plan is.
Interest rates are fixed throughout the term of your bridging loan meaning that you won't pay more if the Bank of England puts up base rates.
How much can you borrow with a second charge secured loan?
The amount you can borrow depends on how much equity you have in the property you provide as security.
Equity is the difference between the value of your property and whatever's left to pay on your existing mortgage and any other secured loans you've taken out.
If you use a second charge bridging loan to raise money, you can borrow up to 65% of the value of the property.
So, for a property worth £300,000 where there is still £50,000 to pay on the mortgage, 65% of its value is £195,000. To work out how much you can borrow, you take away the mortgage owed (£50,000) from the value of the property (£195,000).
This means that, in this case, you can borrow up to £135,000 with a bridging loan.
What is an exit with a second charge bridging loan?
When you apply for a bridging loan, your lender will want to know how you'll pay them back.
Lenders call this your exit strategy.
Let's say that you want to take out a second charge loan on your property to renovate your commercial or mixed-use premises.
One exit might be to repay your bridging loan by taking out a brand new mortgage on your property.
What if you need a bridging loan to pay off an overdue tax or VAT bill because there's been a drop in sales in recent months?
Your exit might involve showing your lender how a return to normal sales volume will generate the cash needed to repay them.
Please get us touch with our team to discuss your exit strategy.
Are there early repayment charges on second mortgages?
Many second charge mortgage providers penalise borrowers a high early repayment charge if you pay off your facility early or switch to another second mortgage lender.
There are no early repayment fees on most bridging loans.
If we recommend an option to you which includes early repayment fees, we'll let you know but we try to avoid them.
Second mortgages, second charge bridging loans - paying them back
If you're successful in applying for a second charge mortgage, you'll now have two mortgages on the same property.
That means you'll be making two sets of monthly repayments.
You'll be paying your second mortgage back over a term of between 12 months and 30 years.
You don't make monthly repayment on most bridging loan unlike with second charge mortgages.
Instead, you repay what you borrowed plus the interest at the end of the loan in one tranche.
There are two types of second charge bridging loans - open and closed.
With a closed bridging loan, you agree to repay your lender back in full on an agreed date.
With an open bridging loan, you agree to make repayment in full at any time within the next 24 months.
How is applying for a second charge bridging loan different from a second charge mortgage?
With a second charge mortgage, you have to prove to your lender to prove you can afford the monthly repayments.
Doing this can be particularly difficult for the self-employed following the scrapping of the SA302.
Applying for a second mortgage is going to be even harder to get through if you have a bad credit rating.
All in all, it can take three months to get funding with a second charge mortgage secured against the residential, commercial or mixed-use property you own.
When you apply for second charge bridging loan, you get an immediate decision in principle from us and we can get the funding to you in around 10 working days.
Applying for a second charge bridging loan is a lot more straight forward. Although your credit rating is a factor, it's not as important to bridging loan providers as it is to mortgage lenders.
