Second and Third Charge Bridging Loans

Not all lenders offer second charge bridge loans, and even fewer provide third charge bridge loans. Sometimes, the same lender will offer second and third charge bridge loans. In other cases, arranging second and third charge bridge loans with different lenders may make sense. 

Because third charge bridge loans are such a niche area of the bridging market, not all lenders advertise or promote their services, making accessing this type of finance difficult if you are approaching lenders yourself. Especially when it comes to third charge bridge loans, you will usually need the help of a specialist like Global Bridging Finance to arrange them and negotiate them for you. This is because, in many cases, lenders like to work with professional intermediaries they know, as it helps bring them comfort that borrowers have been vetted and are found suitable for a loan. 

Rates can vary from lender to lender, depending on why you need a second or third charge bridge loan. The better your credit history, income and financial background and ability to put down a deposit, the easier it will be to access finance, and the more you will be able to borrow. 

If you already have a loan secured against your property (a first charge), you will need to have permission from that lender to be able to use the property as collateral for additional loans. We can advise you on how to do this and what to share with your first charge lender if it's helpful. 

If you want a second or third charge bridge loan, you'll usually want to ensure you can access capital as quickly as possible. Luckily, bridging finance is one of the fastest types of loans you can draw down, and lenders make decisions quickly if they have all the information. Lenders will need to understand why you want to access this type of finance and have what they need to underwrite second and third charge bridge loans. 

Anything you can do to document your financial situation, debt and information about your property before approaching us will help speed up the process, especially compiling information that helps lenders assess your suitability for second and third bridge loans. This information will include documents and proof to support the value of the property your loan is secured against, your finances, your plans for capital and how you will exit. 

If you're accepted for a second or third charge bridge loan, your lender(s) will place a charge on your property. You will need to repay this by a specific date, also known as your exit. You can exit second and third charge bridging loans by refinancing or selling your property. If you refinance, it is usually because you have used additional charge bridge loans to add value to your property. Here, you can secure a new, long-term loan (usually a mortgage) against the increased value of your home or the property. 

Just like with other types of finance, you will need to put down a deposit to access second and third charge bridge loans. The more you can put down for a deposit, the better rates lenders will offer you and the more likely it is that your application will be accepted. 

Second charge bridge loans usually require a minimum of 25% deposit, but if you're able to put more of your own capital forward, we will usually be able to help you access better rates. If a lender perceives that there is a high level of risk or if you have ambitious plans, a lender may lower the LTV that they will offer, so use an LTV of 75% as a guide rather than something that's set in stone. 

Some lenders – especially if you want to borrow a significant amount, will offer this type of finance if you put forward additional security. This can be useful if you have a property portfolio or other assets you can use as security. Using a second or third charge bridge loan may be useful if you are in a solid financial position but want to minimise the amount of capital you will use to finance a property renovation or project, raising finance instead. 

Not everyone is eligible for a second and third charge bridge loan. You'll need to have an excellent financial standing and credit history to be considered by lenders – especially for third charge bridge loans, which typically come with more risk for lenders. You'll also need to show that you have a good income and prove that borrowing is viable and affordable. 

Lenders will want to understand why you want a second or third charge bridge loan and exactly how you will use the funds. Usually, this will need to be well-documented, and you'll need to provide insights into how the loan will help you achieve your plans. For example, if you want a second charge bridge loan to release equity from your property so you can renovate it and add value to it, lenders will want to see how the property's overall value will increase and how your plans support that. Facts, not ideas, are important here, and you'll need supporting documentation to help you make your case. 

Because your lender will use your property as security, lenders will also focus on the quality of your property as an asset. To do this, they will look at its present and future value, the liquidity of the market it is in, demand for properties of the same type, and any issues with it that could hinder its sale or refinancing. 

How you exit a bridge loan is always important, especially in second and third charge deals. As well as looking at the quality of the property you will use as security, lenders will focus on how you will repay the loan. This is known as your exit. Lenders will focus on your exit because second and third charge bridge loans are repaid in order of priority, with first charge loans repaid first, followed by second and third charge loans. Lenders want to ensure that your exit will see you comfortably repay all two or three of the loans and that all the charges are covered. 

Your exit will depend on your plans – both how you plan to use loan capital and how you will repay the finance. Two of the most common exit routes with second and third charge bridging loans are selling the property lenders have secured the loan against or refinancing. Lenders will want to make sure that you have a solid exit strategy that is well-planned and that you can manage to deliver. Lenders will want to understand your plans in detail. You will usually need to provide written details of the steps you will take and a timeline (if you're using a second or third charge loan to renovate, for example) for how you will deliver the exit.

1. Firstly, we always suggest getting advice from an expert if you're considering second or third charge bridge loans. Not all lenders offer second and third bridge loans, and not every borrower is eligible for one – it's a waste of your time to start getting documentation ready if there's some reason that will ultimately block you from borrowing. Sometimes these reasons will be outside your control or won't be immediately apparent, so it's a good idea to explore second and third bridging loans with us before you start trying to access this type of finance. We'll make sure that the loan you want is a good fit for you, and we will look at your exit to ensure it's viable.

2. If you want a second or third charge bridge loan and meet the criteria for this, you will need to inform your first charge lender that you want to take out a second or third charge bridge loan. Usually, a mortgage lender has the first charge on the property. A broker will help you understand what your first charge lender will want to see from you and how to present your request successfully.

3. If your first charge lender supports you getting second or third charge bridge loans, we can start arranging this type of finance by connecting you with the deals on the market. Your broker will help you identify the documents you will need to present to lenders – these are relatively straightforward, for example, proof of income, identification and so on. However, some lenders also want to see more detailed information about your assets and broader financial situation. The party that brokers the loan will be able to tell you what these are, how to present these facts and what supporting documentation to supply along with any overviews. One of the most important parts of second and third charge bridge loans is your exit, and lenders will want clear and concise plans that lay out how you will repay the loan. Any supporting documentation will help your case here, so you can expect brokers to help you make sure your exit is presented as strongly as possible. At this point, it is also worth making sure you have the right team in place to make sure the deal goes forward quickly – usually a legal team and valuers and so on. Any delays from any parties involved in the deal will mean the transaction can take longer, so it's worth ensuring everyone knows what will be needed and when.

4. The best brokers will usually work with you to see the second and third charge bridge loan completed as quickly as possible, rather than only connecting you with the right deal and bowing out. They will help you complete your application with lenders and will remain on board to support you and help you solve any issues if they arise. It's worth exploring with your broker the role they will take and how they will help you at every stage of the deal to ensure you get added value from working with them.