What is a second charge bridging loan?
A second charge bridging loan is basically a bridging loan that is secured on a property that already has an existing mortgage secured against it. A second charge bridging loan may be needed if you are looking to make home improvements and are unable to remortgage. If you are looking to add an extension or loft conversion a second charge bridging loan would get you quick access to funds and help you add value to your property.
First & Second charge bridging loans – what’s the difference?
When looking into a bridging loan it is good to understand what kind of bridging loan you need. If you are taking out a bridging loan on your property that already has a mortgage in place, this will mean it is a second charge bridging loan. This is because the original mortgage is a first charge. Second charge financial products come with higher risk to the lender as if your home needed to be repossessed the original mortgage or first charge would be paid off first with the remaining equity going to pay off and second or even third charge debts.
Whether it is a first or second charge bridging loan this financial product is for short term finance and is offered on an interest only basis. The rates and fees will usually be higher than a standard mortgage but are usually more flexible and quicker to arrange. To make a bridging loan viable there needs to be an exit strategy. This means that there is a plan in place to repay the full loan when the fix term is over. This can be from the sale of a property or a remortgage but lenders will want to know how you plan on paying the loan back.
Can I get a second charge bridging loan?
There are lenders out there that are willing to consider applications for second charge bridging loans, these are more specialist providers and not main stream lenders. Using a specialist broker that has a good knowledge and experience in this area is advantageous as it will allow you to use there experience giving you more chance of being successful.
Unlike residential mortgages bridging loans are assessed on a case by case basis and each lender has different criteria, speak with one of our specialist mortgage brokers for a quote tailored to your circumstances but below is a general criteria that lenders will be looking for to calculate risk to them second charge loan.
- Good credit history
- Solid exit strategy
- Experience with commercial investments
- Good level of security in other property or assets
Second charge bridging loan with bad credit
If you are looking for a second charge bridging loan but have bad credit it will make it more difficult for you to secure the loan. One of the reason for this is down to your exit strategy if your exit strategy to paying off the loan is to remortgage having a bad credit history will make this more difficult and lenders will be aware of this and it will increase the risk of lending to you. If you have additional security that will not be effected by your bad credit then there is a small amount of providers that will be willing to consider your application, speak with one of our specialist brokers to find out if it is possible for you to get a bridging loan based on your personal circumstances.
What are the costs?
Most lenders will offer a maximum loan to value of 75% for bridging loans whether or not they are first or second charge. If you or the property is seen as higher risk then the LTV you may be able to get will be lower sometimes only 50% LTV.
The larger the deposit you have the less risk there will be to the lender which can lead to securing the deal at a better rate. Along with the monthly interest payments there will also be an arrangement fee this is usually between 1% and 2% of the loan amount. Along with this there will also be a valuation fee to pay.
Speak to the experts
Bridging loans are a complex form of credit and if you are looking to get one it is a good idea to speak with a specialist broker with experience of dealing with this financial product. Speak to one of our expert advisors today by calling us or filling in one of our enquiry forms.