First charge vs second charge bridging: what charge position means for you

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What is a legal charge on commercial property?

A legal charge is the security a lender takes over a property. In England and Wales it is registered at HM Land Registry against the title, and it gives the lender the right to enforce, for example by appointing a receiver or selling, if the loan is not repaid as agreed. Scotland uses a different system, the standard security, but the principle of ranking is similar.

When more than one lender holds a charge, they rank in order of priority. Usually that follows the order of registration, although lenders can agree a different order in a deed of priority. On a sale, the proceeds pay off the first charge holder in full before the second charge holder receives anything.

• First charge: the lender with the senior claim on the property.
• Second charge: a lender ranking behind an existing first charge.
• Third and later charges: possible but uncommon in commercial bridging, because so little equity is left to protect them.

How do first charge and second charge bridging loans compare?

Feature	First charge bridge	Second charge bridge
Priority on sale	Repaid first	Repaid after the first charge lender
Typical maximum LTV	Commonly up to 70% to 75% on standard commercial property	Lower, measured on combined borrowing across both charges
Pricing	Lower risk, so usually priced more keenly	Higher risk, so usually priced higher
Consent needed	No, unless another lender already holds a charge	Often needs the first charge lender's consent
Existing mortgage	Repaid or replaced by the bridge	Stays in place
Legal work	Standard for a purchase or refinance	Extra steps to deal with the first lender
Lender appetite	Broad	Narrower, fewer lenders take second charges on commercial property

The table shows the trade off. A second charge keeps your existing mortgage untouched, which can matter if it is on a good rate or carries early repayment charges, but it usually costs more and allows less borrowing.

How is LTV calculated on a second charge?

Second charge lenders look at the combined loan to value: the outstanding first charge plus the new bridge, divided by the property's value. Our guide to commercial bridging loan LTV covers gross and net LTV in more detail.

For example, take an illustrative industrial unit valued at £1,000,000 with an existing mortgage of £400,000.

• Existing first charge: £400,000, which is 40% LTV.
• New second charge bridge: £250,000.
• Combined borrowing: £650,000, which is 65% combined LTV.

If the second charge lender's limit was lower than 65% combined, the bridge would be cut back, or a first charge refinance might release more. You can test your own figures with our LTV calculator.

Do you need your first charge lender's consent?

Often, yes. Most commercial mortgage terms restrict further borrowing secured on the same property without the existing lender's written agreement, and many register a restriction on the title that stops another charge being registered without it. Taking a second charge without consent can breach your mortgage terms.

Consent timescales vary widely. Some lenders respond within days; high street banks can take weeks, and some refuse as a matter of policy. Where consent is unlikely or slow, options include:

• Refinancing the first charge with a larger bridge that repays the existing mortgage.
• Offering a different property as security, where you own one with spare equity.
• Raising the money against another asset altogether.

Ask your solicitor to check the existing mortgage terms early, because the answer shapes the whole structure.

When does a first charge bridge make more sense?

A first charge is the default position for most commercial bridging, and it suits:

• Purchases, including auction lots, where there is no existing lender.
• Refinances where the existing mortgage is expiring, in default or blocking your plans.
• Larger loans, where you need the higher LTV a first charge allows.
• Refurbishment and change of use, where the lender needs control over the asset during works.

If your existing mortgage has early repayment charges, compare the cost of those charges against the higher pricing of a second charge. Sometimes paying the charge and moving to a single first charge bridge is cheaper overall.

When is a second charge bridging loan the better fit?

A second charge bridge can work well when you want to keep an existing mortgage and borrow against the equity above it. Common uses include:

• Raising a deposit or completion funds for another purchase.
• A short-term business need such as a tax bill or stock purchase, secured on business premises.
• A commercial property capital raise where the first charge is on a long-term fixed rate.
• Adding additional security to a bridge on another property, to bring the overall LTV down.

Second charges are most practical where there is meaningful equity, the first lender is cooperative and the amount needed is modest relative to the property value.

Does charge position affect whether a bridge is regulated?

Charge position does not decide regulation on its own. What matters is the property and how it is used. A first or second charge over commercial or investment property for business purposes is unregulated, and we arrange it directly.

If the security includes a home that you or a close family member live in, or will live in, the loan may be a regulated mortgage contract whether it is a first or second charge. Those cases go to a firm directly authorised by the Financial Conduct Authority, which we introduce. Our guide to regulated vs unregulated bridging explains the test.

How we help you choose the right charge position

We look at your existing borrowing, the equity in each property, any early repayment charges and how quickly you need funds, then compare first and second charge options across the bridging lenders we work with. Where a second charge needs consent, we flag that at the start so it does not hold up completion. If neither position works, our guide to alternatives to bridging loans sets out other routes.

Unregulated commercial and investment bridging is arranged directly. Any case where the security includes a home you or an immediate family member occupies, including a flat above commercial premises, may be regulated and is introduced to a firm directly authorised by the Financial Conduct Authority. We are not directly authorised by the Financial Conduct Authority ourselves. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.