A first charge is a legal claim over a property (or other asset) that gives the holder the first right to be repaid from the proceeds if the property is sold. The holder of the first charge is paid before any other secured creditor.
How It Works in Lending
When a lender takes a first charge over a property, it registers that charge at HM Land Registry. If the borrower defaults and the property is sold to recover the debt, the first charge lender is paid first. Any remaining proceeds then go to second charge lenders, then to unsecured creditors.
In mortgage lending, the mortgage lender holds the first charge over the property. When a borrower adds a second loan secured on the same property, the new lender takes a second charge position.
First Charge in Bridging
Most bridging loans are first charge â the bridging lender takes the primary security position because either:
– The property is unencumbered (no existing mortgage)
– The bridge funds the purchase in full, so there is no prior lender
First charge bridging is available from the widest range of lenders and typically at the lowest rates for any given LTV, because the lender has the primary recovery position.
Related Terms
- Second charge: a security interest that sits behind an existing first charge
- LTV (Loan to Value): the loan amount as a percentage of property value
- Charge: a legal claim over an asset to secure a debt
- HM Land Registry: the government body where charges over UK land are registered