How a second charge bridging loan can help - by Tomer Aboody

Tuesday, 26 January 2016
An increasing number of people in need of extra cash are turning to second charge bridging finance to purchase investment properties, inject capital into businesses or make refurbishments in order to prevent disturbing their existing attractive mortgages.

A second charge bridging loan is secured against a property that already has an outstanding loan or mortgage. It is a great solution for those who want to raise capital but don’t want to remortgage cheap tracker or fixed rate deals.

A second charge bridging loan 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.

Some £67.4m of second charge bridging loans were made in 2015, representing 15.5% of all bridging loans throughout the year, according to Bridging Trends Data, a quarterly publication conducted and compiled by bridging lender MTF and a number of the industry’s specialist finance brokers.

As it sits behind a first charge loan, a second charge is usually more expensive, reflecting the additional risk taken by a finance provider. However, rates offered by specialist bridging lender MTF are very competitive and start from just 0.99% per month, at 60% loan-to-value (LTV).

At MTF, 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.

For example, MTF was recently approached by a borrower who wanted make improvements to an investment property in Brixton. The borrower already had a first charge mortgage in place which they didn’t want to alter, but needed access to funds quickly in order to refurbish the property and improve the value to attain a higher rental income.

Within days MTF was able to provide the required £285,000 bridging loan, at 64% LTV on open market value.

The bridging loan gave the borrower the funds needed to complete the project and the time and space required to put viable, longer-term financing in place. 

A bridging finance company is often able to make lending decisions within hours of initial enquiry, allowing funds to be released quickly and providing a speedy solution before the sale of an asset or longer-term financing is found.