When applying for a bridging facility, you may need to apply for a first or second charge loan. This article looks at first and second charge bridging loans, including the differences between them and the best ways you can qualify for each type.
What’s the Difference Between First and Second Charge Bridging Loans?
The type of charge on a loan describes which lender takes precedence over the repayment of the loan if you default on payments. It sets out the order that lenders can reclaim their money if your property is repossessed and sold.
A first charge lender would receive their funds first, then the second charge lender. Whether you take out a first or second charge depends on whether you have any other existing loans or finance on the security property.
What is a First Charge Bridging Loan?
A first charge bridging loan is the primary loan that takes priority over all other charges. If the bridging loan is the only loan secured against the property, then your bridging facility would be a first charge loan. If you default on payments, the first charge lender will take precedence over any second charges and recoup their loan payment first.
What is a Second Charge Bridging Loan?
You’d take out a second charge bridging loan on a property that already has a mortgage or loan in place. If you have existing finance secured against the property, you can take out a bridging loan on a second charge. If you default on payments, the second charge lender will be second in line to get their loan repayments back.
Can I Get A Second Charge Bridging Loan?
Second charge bridging loans are quite common. Whether you can qualify for a second charge bridging loan will depend on each individual lender as well as a range of other factors. The key factors that determine whether you can get a second charge bridging loan are:
How much equity there is in the property. Most bridging lenders allow a maximum of 65% LTV on a second charge so if there isn’t sufficient equity, then borrowing against your property on a 2nd charge can be tricky. (For first charge loans, the max LTV is around 75%).
Whether the lender with the first charge allows any other lender to have a second charge. There are a handful of lenders who don’t allow second charges on a property they have a first charge on.
Speak To Our Experts
To learn more about first and second charge bridging loans, get in touch today. We know that bridging loans can be complex to understand, so our expert advisers are happy to answer any questions you may have.
The best way to secure a bridging loan is to speak to our specialist bridging advisers as they have the experience needed to arrange first and second charge loans. We will talk you through your options and arrange the best deal for your circumstances.