In a fast-moving property market, access to quick, flexible finance is critical for seizing high-yield investment opportunities. One of the most underused yet powerful tools available to UK investors is combining first and second charge bridging loans.
At Sunrise Commercial, we specialise in structuring bridging finance for investors and developers who need smart, layered solutions. This article will explain how using both first and second charges together can help you maximise leverage, manage cash flow, and increase return on investment (ROI)—even if you’re new to development finance.
What Are First and Second Charge Loans?
- First Charge Loan: The primary loan secured against a property. In the event of a sale or repossession, this lender gets repaid first.
- Second Charge Loan: A secondary loan also secured on the same property. It is subordinate to the first charge, meaning it’s repaid only once the first lender’s balance is cleared.
These are commonly used in bridging finance to unlock equity, especially in properties already carrying debt. When structured correctly, the combination provides greater capital access without the need to refinance your existing arrangement.
Why Combine First and Second Charge Loans?
Combining both charges allows property professionals and business buyers to increase liquidity without the time and costs of traditional refinancing. Here’s how:
1. Higher Total LTV (Loan-to-Value)
By layering first and second charges, you may be able to achieve a combined LTV of up to 70–75% on residential investment property (and up to 65–70% for commercial assets). This is ideal when your capital is tied up in equity but not cash.
2. No Need to Disturb Existing Mortgages
If you have a competitive first charge loan or a fixed rate, replacing it could be expensive or slow. A second charge bridge allows you to raise additional capital without affecting your existing loan.
3. Flexible and Fast Funding
Combined bridging facilities can be arranged in 7–14 working days, ideal for auctions, refurbishments, or development exits where time is critical.
4. Preserve Your Cash Flow
By funding 100% of a refurbishment or deposit using both charges, you can keep more of your cash for contingency or further acquisitions.
Key Terms: Gross Loan vs. Net Loan Explained
Many borrowers misunderstand the difference between gross and net loan amounts. Here’s the distinction:
- Gross Loan: The full amount of the loan approved by the lender, including interest (if retained), fees, and setup costs.
- Net Loan: The amount you actually receive in your account after all deductions.
For example:
- Gross Loan: £500,000
- Deducted Interest (9 months): £33,750
- Arrangement Fee (2%): £10,000
- Legal & Valuation Fees: £2,500
- Net Loan Released: ~£453,750
When structuring both first and second charge loans, understanding what you will receive (net) is crucial for managing project costs or auction deadlines.
Typical Loan Terms and Costs in the UK Bridging Market
While rates vary by lender, asset, and risk, here’s what to expect in the current UK property finance landscape:
First Charge Bridging Loans
- Loan-to-Value (LTV): Up to 75% (residential); 65% (commercial)
- Interest Rates: 0.69% – 1.10% per month
- Arrangement Fees: 1.5% – 2.5% of the gross loan
- Legal/Valuation Fees: From £1,000+, depending on the property value
Second Charge Bridging Loans
- Max Combined LTV: Up to 75% on standard BTL/resi properties
- Interest Rates: 0.89% – 1.35% per month
- Arrangement Fees: Often slightly higher than first charge
- Exit Fees: Sometimes applicable (typically 1%)
All fees and rates depend on the loan term, property type, borrower profile, and exit strategy. As brokers, we secure the most competitive pricing and terms by leveraging our lender network.
Real-Life Scenario: How Dual Charges Unlock ROI
Let’s say you’ve purchased a mixed-use commercial building for £600,000 using a first charge bridging loan at 70% LTV (£420,000). You now need £100,000 for refurbishment works.
Rather than refinancing the whole facility (which would delay the project and cost more), you take a second charge bridge for the £100,000—secured against the uplifted value post-completion.
When the works are done and the asset is revalued at £850,000, you refinance both loans onto a BTL or commercial mortgage, repay the bridging facilities, and extract equity or retain a higher-yielding asset.
FAQ: First and Second Charge Bridging Loans in the UK
Q: Can I take out a second charge loan if I already have a mortgage?
A: Yes. As long as the first lender consents and there is enough equity, we can arrange a second charge bridge secured behind the existing mortgage.
Q: What is the maximum combined LTV for first and second charge loans?
A: Typically up to 70–75% combined on residential property, and 65–70% on commercial, subject to valuation and exit plan.
Q: Are second charge loans more expensive than first charges?
A: Generally yes, due to the higher risk to the lender. But in many cases, the higher return on investment outweighs the cost, especially when the loan term is short.
Q: How quickly can I get both loans arranged?
A: If legal documents are prepared in advance, both facilities can complete within 7–14 working days—faster when required and supported by an experienced broker.
Q: What’s the best exit strategy for these loans?
A: Common exits include sale of the property, refinance onto long-term mortgage, or sale of another asset. We help design the funding structure to match your exit route.
Work with a Trusted UK Bridging Loan Broker
At Sunrise Commercial, we specialise in bridging loan solutions that most lenders or general brokers won’t touch. Our team can:
- Quickly assess your borrowing power across first and second charges
- Access specialist lenders for complex or time-sensitive deals
- Maximise your net loan by structuring costs efficiently
- Advise on exits, valuations, and legal coordination
If you’re an investor, business buyer, or developer looking to scale without tying up all your capital, combining first and second charge loans could be your next competitive advantage.
Ready to Unlock Your Next Deal?
Get in touch with us at Sunrise Commercial. Whether you’re looking to fund a purchase, refinance an asset, or unlock cash for refurbishment—we’ll structure a solution that works.
📞 Call us now or 📧 Request a callback to discuss your scenario with a qualified broker.
📞 Call us at 07939 091418
📧 Email: john@sunrisecommercial.co.uk
🌐 Visit: https://www.sunrisecommercial.co.uk/
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