5 November 2025 | Written by Mercantile Trust

Understanding First Charge Mortgages: What they are and how they work

When it comes to property finance, you’ll often hear terms like first charge and second charge mortgage. But what exactly do they mean, and why does it matter which one you have? In this guide, we’ll focus on first charge mortgages — what they are, how they work, and when they might be the right option for you.

What is a First Charge Mortgage?

A first charge mortgage is the main loan secured against a property. It gives the lender the first legal claim over the property if it were ever sold or repossessed. In other words, the lender holding the first charge is first in line to recover any money owed from the property’s sale proceeds.

When you purchase a home or investment property with a traditional mortgage, that loan is almost always a first charge mortgage.

How a First Charge Mortgage works

If you take out a first charge mortgage, the lender will register their interest with the Land Registry. This registration ensures that they have legal priority over any other loans secured against the same property.

Example:
Suppose you buy a property for £300,000 and take out a £200,000 mortgage. Your mortgage lender holds the first charge.
If, later, you take out a smaller loan using the same property as security (for example, a £50,000 second charge loan), that second lender only has a secondary claim.

If the property is sold and there’s still money owed, the first charge lender is paid first, and the second charge lender is paid from any remaining funds.

When you might need a First Charge Mortgage

First charge mortgages are suitable for a range of situations, including:

Buying a new property – whether it’s your first home, a buy-to-let investment, or an additional property.
Refinancing – switching from your current lender to a new one, either to access better rates or release equity.
Property investment growth – landlords often use first charge loans to acquire or refinance properties within their portfolio.

For landlords and investors, a first charge mortgage can also be structured flexibly — for example, with interest-only repayments, no exit fees, or shorter terms suited to refinancing or bridging needs.

Benefits of a First Charge Mortgage

Lower interest rates – Because the lender has the first legal claim on the property, first charge mortgages usually come with lower rates than second charge loans.
Larger loan amounts – You can typically borrow a higher percentage of the property’s value (loan-to-value, or LTV), especially if it’s your main mortgage.
Clear repayment structure – Repayments are usually spread over a longer term, making them more predictable and manageable.
Flexibility for property investors – At Mercantile Trust, we offer bespoke first charge mortgage options for landlords, including flexible underwriting for complex portfolios or non-standard properties.

First Charge vs. Second Charge Mortgages

The key difference lies in the order of priority:

Feature	First Charge	Second Charge
Legal Priority	First in line if property is sold	Second in line
Typical Purpose	Main mortgage	Additional borrowing
Interest Rates	Usually lower	Usually higher
Risk to Lender	Lower	Higher
Common Use	Home purchase, Rental property purchases, refinance	Capital raise, debt consolidation, business use

Both have their place in property finance — but your choice depends on your needs, current mortgage terms, and long-term plans.

Is a First Charge Mortgage Right for you?

If you’re buying, refinancing, or expanding your property portfolio, a first charge mortgage is often the most cost-effective option.
However, specialist lenders like Mercantile Trust can also help where traditional banks can’t — for example, if you’re self-employed, have multiple income sources, or need a more flexible approach to underwriting.

Final thoughts

A first charge mortgage remains the foundation of most property finance arrangements. It offers stability, lower costs, and the flexibility to grow your property investments with confidence.

Whether you’re an experienced landlord or a first-time buyer, understanding how first charge lending works helps you make better, more informed financial decisions.

If you’re exploring first charge or second charge buy to let mortgage or bridging loans options, speak to the team at Mercantile Trust — we assess every case individually, taking a common-sense approach to help you secure the right finance for your circumstances.

Ready to explore your mortgage options? Contact us today for a tailored solution.