2nd Charge Bridging Loans

A second charge bridging loan can be a quick and easy way to release funds from a property for many different purposes.

At Adept Mortgages, we source the best 2nd charge bridging loans from the UK’s leading lenders, with borrowing available up to 75% LTV and rates starting from 0.82% pm.

Call us – 01604 212879

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    What is a 2nd charge bridging loan?

    A 2nd charge bridging loan is a short-term loan secured against a property, which might be residential or commercial, and which sits behind any current 1st charge loan, such as a mortgage.

    As the loan is a 2nd charge, it falls behind the 1st charge loan in order of priority when the property is sold or refinanced, with the 1st charge lender being repaid first. Due to the higher risk for the 2nd charge lender, bridging terms for a 2nd charge loan can often be more restrictive regarding the maximum loan to value, and rates will be higher than those of a 1st charge.

    Guide To 2nd Charge Bridging Loans

    Author: Darren Ferguson – Bridging Specialist & Owner

    First Published: 05th March 2024

    Read Time

    Read Time – Approximately 8 Minutes

    Our 2nd charge bridging guide should be helpful, but it’s always best to speak with an adviser to discuss your circumstances and get the best advice. Call us on 01604 212879 should you have any questions.

    We Can Help….

    A 2nd charge bridging loan can be a quick and versatile means of raising funds against your home, or other property, without needing to refinance your 1st charge mortgage.

    Lenders are typically very flexible and happy to work with applicants to raise funds for many different purposes.

    Call us on 01604 212879 for a no obligation 2nd charge bridging finance review.

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    Fast Funding Bridging Loans

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    2nd Charge Rates From 0.82% pm

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    Automated Valuations Available

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    Property Refurbishment Or Development

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    Land Purchase / Tax Bills / Debt Consolidation & More

    How quick is a 2nd charge bridge?

    It’s possible in some instances for a 2nd charge bridging loan to be drawn down in a matter of days, but in most instances, you should allow 2 to 4 weeks, depending upon circumstances and requirements.

    As with any secured funding, if complications arise, this could slow the process down.

    Factors that can influence the speed:

    • Specialist Bridging Lenders – If speed is vital, picking the right lender is essential. Many mortgage lenders also offer bridging loans, but as mortgages are their primary business, they tend to underwrite bridging loans like they do their mortgages, often resulting in increased underwriting times and paperwork. For speed of completion, it’s generally best to work with bridging lenders who specialise solely in bridging loans.
    • Valuation Requirements – All lenders will require a valuation on the property. This valuation could be a physical valuation, where a valuer physically needs to visit the property, or many lenders now offer automated valuations, also known as desktop valuations, which can speed the process up considerably.

    What Are Automated Valuations?

    Automated valuations are a method of valuing a property using technology instead of a manual inspection. The technology uses various data points to generate a value, which helps speed the process up and eliminates or reduces the cost of valuing a property.

    It should be noted that while an automated valuation can help speed things up, it may not reflect the property’s actual value, which could then impact the loan to value and available borrowing.

    How much can I borrow on a 2nd charge bridging loan?

    The amount you can borrow will depend on 3 main factors:

    • The property value
    • The amount outstanding on the current 1st charge
    • The rate the lender charges

    Most bridging lenders, for 2nd charge borrowing, will not want to go higher than 65% to 70% overall loan to value (LTV), with a small number of lenders going to 75% LTV.

     

    • For example:
      • Property value of £600,000
      • Current 1st charge mortgage outstanding of £250,000 
      • the lender has a maximum LTV of 70% of the property value – which equates to £420,000
      • Current debt outstanding of £250,000 which leaves room for additional funding of £170,000* (£420,000 – £250,000)

      *This is typically the Gross loan, to be inclusive of any fees and interest, meaning the net amount received will typically be less.

       

    Learn More About Bridging Finance

    Our guide to bridging finance will cover all the basics and more of how bridging loans work and what type of bridging might be best for you. 

    • Bridging Finance Criteria
    • Different types of bridging loans
    • Bridging for different property types
    • Interest servicing methods and loan to values
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    What are the costs of 2nd Charge Bridging Finance?

    The following fees are typically payable when taking out a 2nd charge bridging loan:

    Lender Arrangement Fee – this will range from 1% to 2% of the loan amount to be borrowed. This can typically be added to the loan (although you’ll pay interest on it if you do)

    Valuation Fees – If a physical inspection of the property is required then you’ll need to cover the cost of this upfront. Its generally not possible to add valuation fees to the loan. The cost of the valuation will depend on the property value.

    Legal Fees – You will have to instruct a solicitor to deal with the legal side of things, and most bridging lenders will want you to cover the cost of their legal fees also. Legal fees may be able to be deducted from the advance, although you might have to pay an initial amount to get started.

    Exit Penalties – Some lenders might charge an ‘exit’ penalty if you clear the loan early. Typically, this is only within the first 1 to 3 months, but it is always worthwhile checking, particularly if it is a very short term loan require. The penalty is typically a percentage of the loan amount, or the equivalent of 1 months interest.

    What are the interest rates with 2nd charge bridging loans?

    Interest rates will vary from lender to lender, and will be subject to the following:

    • The overall LTV required – the lower the LTV, the lower the rates will be.
    • The credit profile of the applicant – some lenders prefer applicants with a clean credit profile
    • The type of security – residential properties will attract better rates than commercial properties.

    Second Charge Bridging Rates Starting From 0.82% pm With Interest Roll Up & No Monthly Payments. Automated Valuations Available. Call Us On 01604 212879

    Will I need consent from my current mortgage lender?

    Yes, in most instances, and to secure the best terms for the bridging loan, consent from the lender with the current 1st charge will be required. Before exploring any 2nd charge bridging options, we recommend speaking to your current lender to find out whether they will be happy to consent to an additional charge being registered against the property.

    What if they don’t provide consent?

    A lender may not allow an additional charge to be registered in certain circumstances. This might be because of payment problems with the current mortgage, either current or historical, or perhaps their criteria don’t allow for 2nd charges.

    Should this be the case, we can secure an ‘equitable charge’ instead. An equitable charge is effectively a notification on the Land Registry as a notice against the title rather than a formal legal charge. Sometimes, it may not even be registered on the Land Registry. As it’s not a formal charge, the lender won’t require consent from the 1st charge lender.

    Get the best bridging rates from the leading lenders

    We compare bridging rates from the UK’s leading lenders, finding the best terms, to enable you to achieve your property goals.

    We can help with:

    • Unregulated and Regulated Briding Loans
    • Rolled up, retained and serviced interest bridging loans
    • Purchase and refinance 
    • Funds for refurbishment works
    • 1st & 2nd charge bridging loans
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      2nd Charge Bridging FAQs

      Can I get a 100% 2nd charge bridging loan?

      Yes, this is possible, but only when additional security can be used to help support the loan. Typically, any other property used will also need to be owned by the same applicant and have sufficient available equity, which we would say needs to be a minimum of 50%.

      What is the maximum term for a 2nd charge bridging loan?

      24 months is typically the maximum, with some lenders only offering terms up to 12 months. 

      How do I repay the bridging loan?

      The lender will want to understand how the loan is to be repaid, and typically, this will be from the sale or refinance of the property before the end of the bridge term. You should be confident that a suitable exit is in place to repay the bridge.

      Can I get a 2nd charge bridging loan with bad credit?

      Yes, absolutely. Bridging lenders will mainly focus on the asset, and the exit, and won;t be so concerned about the borrowers credit profile. Call us to discuss your options. 

      Can I use funds to purchase a property at auction?

      Yes, you can. This is a very common scenario. Auction purchases are usually tied to a 28 day completion period and bridging loans are ideally suited to that timeframe.

      Explore Bridging Finance

      Find out more about Bridge-to-Let Finance

      For chain breaks, explore Regulated Bridging Loans

      For new developments and conversions, find out more about Development Finance