If you need finance but your property already has a mortgage on it, you will need to look for a second charge bridging loan.
Second charge loans are those which are secured via an asset which already has a ‘first charge’ on it.
Second Charge Loans are Secured
Since all lenders need to protect against risk, they ask for assets, usually property, to stand as security for money borrowed.
In the case of a property with an existing mortgage, the mortgage company will have the first charge, or right to use that asset to cover their loan, should the borrower default.
Any equity which has accrued in that property may be enough to stand as collateral for a ‘second charge’ bridging loan.
How Much Bridging Finance Could I get as a Second Charge?
First you need to understand how much equity you have in your existing property – this means how much is owned outright by you or your company.
For example, if your office is worth £750,000 and you have £450,000 left to pay on your mortgage, you will have £300,000 of equity.
That means your bridging loan will be calculated using that as the starting point. Second Charge Loans usually range up to 70% LTV, so with a £300,000 equity you could borrow up to £210,000.
All of this is lender specific and based on a variety of factors pointing to the level of risk the lender feels they will be comfortable with.
How Much Will it Cost?
Arrangement fees are usually approximately 2% of the total loan amount, and interest will be from 0.85% per month.