Legal Charges: Your Guide to Bridging Loan Security

Confused about legal charges for your bridging loan?

Understanding how legal charges work is your first step to smarter property finance.

Legal Charges: Your Guide to Bridging Loan Security

Confused about legal charges for your bridging loan?

Understanding how legal charges work is your first step to smarter property finance.

When you’re arranging a bridging loan, the way it’s secured against your property can make a real difference to your borrowing options and costs.

A legal charge is your lender’s safety net – it’s their formal interest in your property until you’ve paid back the loan, in full.

Bridging finance lenders offer so much more flexibility in how these charges can work. You’re not limited to just one way of securing your loan.

Perhaps you’re looking to buy a property at auction and need quick finance. Or maybe you want to borrow against a property that already has a mortgage. These different situations call for different types of legal charges, each with their own benefits and considerations.

Let’s look at how different types of charges work, so you can see which ones might suit your situation best.

A legal charge puts your property up as security for your loan.

When you take out a bridging loan (or mortgage), your lender needs to know they can recover their money if things don’t go to plan. The charge gives them certain legal rights over your property until you’ve repaid what you’ve borrowed.

This isn’t just a private agreement between you and the lender.

The charge gets registered with the Land Registry, creating an official record that anyone can check. It’s the same as how your mortgage lender has a charge on your home – but bridging loans offer more ways to structure these charges.

With a traditional mortgage, you’re usually looking at a straightforward first charge.

But bridging lenders can work with various security arrangements – first charges, second charges, or even multiple charges across different properties.

For example, if you own a house worth £500,000 with a £200,000 mortgage, you could get a second charge bridging loan while keeping your existing mortgage in place. Or if you’re buying a property outright, a first charge bridging loan might be your best option.

Think of these different charge types as tools in your financing toolkit. Each one has its place, and choosing the right one depends on what you’re trying to achieve with your property plans.

First Charge Bridging Loans

When you secure a first charge bridging loan, your lender stands at the front of the queue if things go wrong.

They get the first right to the property’s value if repayment becomes an issue and repossession is required. It’s the most secure position for any lender, which means better borrowing terms for you.

First charge loans work well for purchases.

Let’s say you’ve spotted a three-bedroom house in Manchester listed at £300,000. You’ll need to complete within 28 days of the auction – much faster than a standard mortgage allows. A first charge bridging loan could provide up to 75% of the purchase price, and because you’re offering clean security, you’ll get more competitive rates.

These loans also make sense when you’re buying property outright or if your existing mortgage is nearly paid off. Lenders prefer first charges because they’re straightforward – there’s no need to get permission from other lenders or work around existing debts.

If you have a clean title on your property, you’ll find the process moves quickly.

Your solicitor can handle the legal work without coordinating with other lenders, which often means completing in just a few weeks. This speed comes in handy when you need to move fast on a property deal.

High-street banks and specialist lenders offer first charge bridging loans, but their criteria vary.

Some want minimum property values of £200,000, while others focus on properties worth £500,000 or more. The cleaner and simpler your case, the more options you’ll have.

Let’s talk bridging loans!

Book your free consultation today and let’s discuss how we can help you achieve your property goals.

Second Charge Bridging Finance

Already have a mortgage but need extra funds?

A second charge bridging loan lets you borrow against your property’s value while keeping your existing mortgage in place. This applies to residential mortgages, buy to let mortgages and commercial mortgages.

You won’t need to disrupt your current arrangements or face early repayment fees.

Here’s how it works in practice.

Say you own a London property worth £750,000 with a £300,000 mortgage. You’ve spotted an investment opportunity but need £200,000 quickly. A second charge bridging loan could unlock that equity without touching your main mortgage.

Your original mortgage lender needs to know about your plans, and agree to the new charge.

They’ll want to check that adding another loan won’t put their security at risk. Most lenders will agree if you’ve kept up with your payments and have enough equity in the property.

Property investors often use second charges to expand their portfolios.

Imagine you’ve found a bargain property that needs quick action. Rather than selling an existing property or remortgaging, you could use a second charge to raise the funds, quickly.

Once you’ve completed the purchase or finished your project, you can refinance both loans together or sell the property to repay the bridging loan.

Keep in mind that second charges come with higher rates than first charges – that’s because the lender takes second position behind your mortgage, which carries more risk. But for many investors, this extra cost is worth it when weighed against the flexibility and speed these loans offer.

Third Charge Loans!

While first and second charge bridging loans are most common, you can actually get a third charge loan – though they’re less frequently used.

This means placing another loan behind both your mortgage and an existing second charge.

Let’s say you have a property worth £800,000 with a £400,000 first charge mortgage and a £100,000 second charge loan. You could potentially add a third charge bridging loan, though you’ll find fewer lenders willing to take this position.

Third charges come with higher interest rates because the lender is third in line to recover their money if things go wrong.

You’ll also need consent from both your mortgage lender and second charge lender. Most lenders who offer third charges will want to see significant equity in the property to offset their increased risk.

For property investors and developers, third charges occasionally make sense when you need to raise additional funds but don’t want to disturb existing finance arrangements. However, many borrowers find it simpler and more cost-effective to refinance existing loans rather than adding a third charge.

Alternative Charge Types

Beyond first and second charges, bridging finance offers several other innovative ways to secure your loan.

These options might suit you if standard charges don’t quite fit your needs, or if you’re looking for more flexible arrangements.

Let’s look at two alternatives that offer different benefits: equitable charges for speed and flexibility, and comfort charges for high-net-worth borrowers who need bespoke solutions.

Equitable Charges

Sometimes you need a different approach to property security.

That’s where equitable charges come in. Unlike standard legal charges, these create a binding agreement between you and the lender based on property law principles, without registering at the Land Registry right away.

You might use an equitable charge loan when time is tight or if your main mortgage lender hasn’t agreed to a second charge. For example, if you’re buying a commercial property and the seller needs to complete within days, an equitable charge could help you move faster than waiting for Land Registry registration.

These charges work well for short-term lending, but they do have limits. Most lenders won’t use them against your main home, and you’ll find they’re mainly offered by specialist lenders rather than high street banks. Max LTV is 75%.

They usually convert to full legal charges later on.

Comfort Charges

Private banks offer comfort charges to their established clients, particularly those with substantial assets. These charges provide extra security without the rigid structure of traditional legal charges.

Let’s say you’re a business owner with multiple properties and need quick finance for a new venture.

Your private bank might offer you a loan secured by a first charge on one property, plus a comfort charge on another. This gives them additional security while giving you more flexibility with your assets.

These arrangements work particularly well if you have international properties or complex income structures. Private banks understand that high-net-worth clients often need bespoke solutions that don’t fit the standard lending model.

One key benefit of comfort charges is they don’t appear on Land Registry searches.

This privacy appeals to many wealthy borrowers, though you’ll usually need an existing relationship with the bank to access these options.

Complex Security Structures

When you’re managing multiple properties, simple charge arrangements might not give you the best results. That’s where more sophisticated security structures come into play – they help you make the most of your entire portfolio.

Blended Charges

Blended charges mix different types of security across multiple properties to create a more flexible borrowing structure. It’s like having a menu of options rather than a set meal.

Say you own three properties: one with no mortgage, one with a small mortgage, and one you’re currently developing.

Instead of arranging separate loans for each, you could blend the security. You might use a first charge on the unmortgaged property, add a second charge on the mortgaged one, and include a charge on the development property too.

This approach works particularly well for portfolios worth £1 million or more.

You’ll get better terms than arranging individual loans, and you can keep existing finance in place where it makes sense. While the arrangement fees might be higher, the overall cost often works out lower.

Cross Charges

Cross charges link several properties together as security for one loan. Each property provides mutual security through first legal charges, creating a single security package.

Here’s a real-world example: You own three buy-to-let flats in Birmingham, each worth £300,000. Rather than setting up three separate loans, a cross charge treats them as one security worth £900,000. This usually leads to better terms than you’d get with individual loans.

Cross charges work when you’re:

  • Buying multiple properties at once
  • Refinancing a portfolio
  • Raising capital against several properties
  • Managing a mix of residential and commercial assets

Many experienced property investors prefer cross charges because they simplify their borrowing. Instead of juggling multiple loans with different terms and rates, you get one straightforward arrangement.

Making the Right Choice

While having various charge options gives you flexibility, finding the right one often comes down to your specific situation.

Sometimes circumstances – or lenders – narrow down your choices pretty quickly.

Take auction purchases, for example.

If you’re buying a property outright, a first charge is the only choice.

But what if you’re a developer juggling multiple projects? You might need a blended charge structure to work across your portfolio.

Property investors often find their main mortgage lender won’t agree to a second charge.

In these cases, an equitable charge might be your best way forward. Or if you’re dealing with a portfolio of properties, a cross charge could give you better overall terms.

A good broker knows which lenders offer what options.

They’ll look at factors like:

  • How quickly you need the money
  • What security you can offer
  • Your exit strategy
  • Any existing finance arrangements
  • The purpose of your loan

Common mistakes include choosing based on interest rates alone or not considering how the charge structure affects your future borrowing options.

That’s why getting expert help matters – brokers work with these loans every day and understand which lenders suit different situations.

A broker can also spot opportunities you might miss. Maybe you could use a comfort charge through a private bank, or perhaps a blended structure would work better than several individual loans.

Next Steps

Choosing the right legal charge structure puts you in a stronger position when arranging your bridging loan.

Each type of charge has its place, from straightforward first charges for auction purchases to complex blended charges for property portfolios.

Your circumstances will often point you toward certain options.

You might need the speed of an equitable charge, or the flexibility of a cross charge for multiple properties. What matters is finding a structure that works for your specific situation.

Getting professional help makes a real difference here.

An experienced broker who understands bridging finance can match you with lenders who offer the right type of charges for your needs. They’ll help you avoid common pitfalls and find opportunities you might otherwise miss.

Ready to explore your options?

Give us a call for a no-obligation chat about your property plans. We’ll help you understand which charge structures could work best for you and connect you with lenders who can help.

FAQ

Yes, you can get a second charge bridging loan while keeping your existing mortgage. You’ll need consent from your mortgage lender, and there must be enough equity in your property.

Our lenders look for minimum property values of £200,000, though some prefer £500,000+. Higher value properties often secure better terms.

Yes, foreign nationals can secure bridging loans against UK properties. Some lenders specialise in these arrangements.

Cross charges can combine different property types in one security package. For example, you might include residential and commercial properties under a single loan.

Read more: A Guide to Cross Charge Bridging Loans

No, your existing mortgage terms stay the same. However, you’ll need your mortgage lender’s permission for the second charge.

No, comfort charges are mainly offered by private banks to established, high-net-worth clients.

Yes, through either blended or cross charge arrangements. This often works well for portfolio investors.

First charges typically offer up to 75% LTV, second charges around 65-70%, varying by lender and property.

Related reading: How Much Can I Borrow on a Bridging Loan?

Equitable charges create a binding agreement without immediate Land Registry registration, offering faster completion but converting to legal charges later.

Alternative options include refinancing, using other properties as security, or considering equitable charges.

Still have more questions?

Just give us a call on 020 3488 5706 to speak with an expert.
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