An increasing number of people in need of extra funds are turning to second charge bridging loans to purchase investment properties, inject capital into businesses, or make refurbishments in order to prevent disturbing their existing attractive mortgages.
Demand for second charge lending is set to increase throughout the year. In a sustained low-interest rate environment, it now often makes more sense for a borrower to release equity on a property by taking out a second charge, rather than the prospect of refinancing away from their current deal.
A second charge bridging loan could be the ideal solution for those who already have a mortgage secured against their property but requires further funds for a short period of time.
Second charge bridging loans can be used for many reasons, such as purchasing an investment property, business expansion, and redevelopment of an existing property to name but a few.
What is a second charge bridging loan?
A second charge bridging loan sits behind an existing loan or mortgage. If there is enough equity left in the property to secure another loan against it, a second legal charge may be taken out.
A second legal charge can be secured on all property types, including buy-to-let, residential and commercial assets, and typically has a 12-month maturity, unlike a secured loan which is a form of longer-term financing.
As it sits behind a first charge loan, a second charge will always require consent from the first charge lender and is usually more expensive than a first charge, reflecting the additional risk taken by a finance provider.
When are second charge bridging loans beneficial?
- If you are on a low rate/interest-only mortgage
Using a second charge bridging loan means you keep your existing mortgage rate. There would be no changes to the existing mortgage terms and conditions. A second charge could allow for more flexible repayment terms, which could potentially save thousands of pounds in interest.
2. If you’re locked into a fixed rate with early repayment charges
If you must pay a large penalty for stopping/switching your existing fixed rate mortgage early, a second charge loan may be cheaper as the existing mortgage stays in place and the penalty is not charged. It would be beneficial to run a cost comparison in this scenario.
3. You’re unable to secure further funds from your mainstream lender
Mortgage rules have become stricter in the past couple of years, with lenders applying tough ‘stress’ tests to make sure borrowers can meet repayments if interest rates rise. However, second charge bridging loan providers don’t rely on the same tests and can tailor a solution to suit your individual borrowing needs. Second charge bridging loans are also particularly helpful for those with unusual income structures, such as the self-employed, or those with complex financial backgrounds.
4. You need the funds quickly
Where a mainstream bank may take several months to put together a loan for a borrower, a bridging finance company is often able to make lending decisions within hours of initial enquiry, so funds can be released quickly, sometimes even in less than a week. A second charge bridging loan can be a useful tool for those who simply need a rapid cash injection.
How much can you borrow?
You can borrow a maximum of 70% loan-to-value and loans can be arranged from £100k to £5m. The actual amount will depend on the available equity in the property and affordability of the loan.
How can MT Finance help?
At MT Finance, we believe a second charge bridging loan is about empowering borrowers to enable them to take advantage of time-sensitive opportunities that can make or save them money.
As an example, we helped a client who required £349,000 second charge loan on her £8.5m property. The client was part way through refurbishing her investment property, but the process had been delayed. She didn’t want to remortgage as she intended to sell the investment property as soon as the refurbishment works on it were complete and didn’t want to be penalised for early repayment.
In just 12 days, MT Finance provided a £349,000 million second charge bridging loan at 39% LTV. Interest was retained over 12 months, with no exit fees or early repayment charges. No personal guarantees were required.
Our second charge bridging loan gave her time to carry out the works and significantly increase the value of her investment property. The client will sell the investment asset to exit the bridging loan, against the higher value.
Second charge bridging loans will continue to offer significant financial savings for a wide range of borrowers, not just those who may struggle to obtain finance through traditional routes.
MT Finance is a multi-award-winning bridging finance lender and we have many years’ experience and know-how when it comes to second legal charges. We assess every single application for a second charge loan on a case by case basis, assessing each case on its own merits. Our flexible approach means we can structure your second charge bridging loan to your exact requirements and allows us to make quick decisions and deliver funds at speed. We also do not charge any exit fees or early repayment fees and do not have any lengthy and tedious application forms for you to fill out.
Our entire application process is quick and easy and with highly competitive interest rates and no upfront fees, we offer a fast, transparent, and stress-free service.
Contact us today by calling 0203 051 2331 or filling in our contact form. Our team are on hand to discuss your second charge bridging loan enquiry and will be happy to answer all your questions and allay any concerns. Please note that if the second charge loan is secured on a residential property, it must be for business use only.