Second Charges

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A second charge loan lets you raise funds against a property that already has a mortgage, without repaying or replacing that mortgage. It can be quicker and cheaper than refinancing, particularly where your existing mortgage has a competitive rate or would carry early repayment charges if it were repaid.

How a second charge works

The new lender registers a second legal charge on your property, ranking behind your existing mortgage. If the property is sold, your existing lender is repaid first and the second charge lender is repaid from what remains. Because of this, the second charge lender looks at the combined loan-to-value, which is the total of both loans measured against the value of the property.

Second charges are used for many of the same purposes as bridging loans. These include raising capital for a business, funding a deposit on another property, paying for refurbishment works, or settling a tax bill or other liability quickly.

Your existing lender’s consent

Almost every second charge lender will require your existing mortgage lender to give written consent before the second charge can be registered. Most mortgage terms prohibit further borrowing secured on the property without the lender’s permission. Many mortgages also have a restriction registered on the title at HM Land Registry, which prevents a second charge being registered without the existing lender’s agreement.

Some mortgage lenders will not give consent at all, and others take several weeks to respond. Before you apply, please contact your existing lender and ask:

• whether it will consent to a second charge being registered on the property;
• how long it usually takes to deal with a request;
• what information it will need from you and from the new lender; and
• whether it charges a fee for giving consent.

Checking this before you apply can save a great deal of wasted time and cost. If your lender will not consent, it is far better to know at the start, so that we can look at other options with you, such as refinancing the existing mortgage or offering different security.

What the new lender will need

As well as the information set out in our What Lenders Will Ask For guide, the second charge lender will need details of your existing mortgage. This includes the lender’s name, your account number and a recent mortgage statement or redemption figure showing the balance outstanding. Please tell us at the outset if you have missed any payments on your existing mortgage, as this is one of the first things a second charge lender will check.

Once the loan is agreed, the new lender’s solicitor will write to your existing lender to request its consent, and will give it formal notice of the second charge on completion.

Second charges on your home

Churchbridge arranges unregulated, business-purpose finance. If you, or a close family member, live in the property or intend to, a second charge loan is likely to be a regulated mortgage, which we do not arrange. Please see our Occupancy guide for more detail.

After completion

You will need to keep up the payments on your existing mortgage throughout the second charge loan. A default on your first mortgage will usually also be a default under the second charge loan. If you plan to remortgage or change your existing mortgage during the term, please speak to the second charge lender first, as its consent will usually be needed.