Second charge bridging finance is typically used for capital-raising purposes, where repaying the original first charge mortgage with a new, higher loan to value loan would result in higher interest rates or early repayment charges.
A first charge is the primary mortgage or loan secured against a property, which takes precedence over all other finance secured against it. If there is sufficient equity in the property, then it is possible to secure a second charge against it as well. In certain situations, this can be a useful and sensible option.
Say, for example, you own half the equity in a commercial property worth £1m, and funded the remaining £500,000 by taking out a commercial mortgage. If you needed or wanted to release some of this equity, you could either remortgage, or take out a second charge loan without repaying the existing mortgage. The money can then be used for investment or business purposes.
If you are looking for a short-term cash injection, second charge bridging finance is something to consider. Our brokers will be able to explain the advantages and disadvantages to you in full.