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.