Second Charge Bridging Loans

A second charge bridging loan is a secured loan where the lender takes a secondary position in terms of claims over the property. If the borrower defaults, the first charge lender is paid first.

Second charge bridging loans are a highly versatile form of finance. Whether you own just a single buy to let property, or have a large property portfolio, unexpected costs always arise and a second charge bridging loan is a great way to arrange finance quickly to cover this possibility. You may be expanding your business by buying another property at auction; if so you might consider choosing to take out a second charge bridging loan to pay for a property while you arrange a longer term finance solution such as a buy to let mortgage. You may wish to purchase a new property and need some short term finance whilst you wait for another property to sell, or fund some property development; if so, a second charge loan could help.

A second charge bridging loan is secured against the equity in your property, so the amount you can borrow depends on how much equity is available. Equity is the portion of your home you own outright, free from any existing mortgage. As with many other types of finance, the larger the deposit you can provide, the less you’ll need to borrow. This can reduce the overall cost of the loan, as the lender is taking on less risk.

Second charge bridging loans are usually more expensive than a mortgage. This is because they offer the benefit of borrowing larger amounts of money quickly, as well as letting you repay them over short periods of time, without any penalty charges. Like other forms of lending, the interest rates is partially based on the risk of the finance not being paid back. To mitigate this risk, when you apply for a second charge bridging loan, the lender will ask you to have a feasible exit strategy when you take out the loan. This usually tends to be one of two things: You plan to sell the property and repay the loan from the proceeds You plan to switch to a longer term form of finance, typically a mortgage.

Bridging loans are known for their speed, with some lenders offering funds within as little as 1-2 weeks, making them ideal for time-sensitive situations.

Having a poor credit profile doesn’t mean that you won’t be accepted for a second charge loan. Although some lenders may not be able to assist you, Mercantile Trust may be able to help. We consider all credit histories including those that have: Accounts in default CCJ’s (County Court Judgement) Missed payments Historic IVA (individual voluntary arrangement) which is now settled

It depends on your particular needs and circumstances, but typical alternatives include commercial loans, secured loans, development finance and asset loans. Although a second charge bridging loan may provide the best option, when it comes to both speed of completion and avoiding any change to your first charge mortgage, there may be a better alternative if these things are less important to you.