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First vs Second Charge Bridging Finance Explained
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A bridging loan can sit as a first charge or a second charge against a property. The difference determines who gets repaid first if the asset is sold, how much a lender will advance, and the interest rate. This guide explains both structures for UK limited companies, LLPs and partnerships with four or more partners raising short-term property finance.
What does charge order actually mean
A charge is a lender's legal right to be repaid from the sale proceeds of a property, registered at the Land Registry, and the order of charges decides who is paid first if the borrower defaults and the property is sold. A first charge lender takes priority over every other charge on the title; a second charge lender is repaid only after the first charge is cleared in full, then takes what remains.
Most trading companies already hold a mortgage or existing bridging loan against a commercial or investment property when they need further short-term funds. Rather than refinancing the whole facility, a second charge lender can advance against the equity that sits above the existing first charge, leaving the original loan undisturbed.
When a first charge bridge is the right structure
A first charge bridge suits a company buying a property outright, refinancing an existing first charge lender, or where no other debt is secured against the asset. Because the lender ranks ahead of everyone else, pricing and loan-to-value tend to be more favourable than a second charge equivalent on the same property.
Each lender sets its own maximum loan-to-value, and it depends on the property and the exit route, so there is no single figure that applies to every deal. Monthly rates are commonly in the 0.55% to 0.95% range as at September 2026. Commercial and semi-commercial property, and land with planning consent, are often lent against more cautiously than a simple residential investment, and unusual or hard-to-value assets may get a smaller loan or a higher rate.
When a second charge bridge makes sense
A second charge bridge is used when a company wants to release equity from a property without disturbing an existing first charge mortgage or bridging loan, often because that facility has an early repayment charge or a rate worth keeping. The second charge lender advances against the gap between the current first charge balance and the property's value.
A second charge lender works out its limit on the combined loan-to-value: it adds the balance still owed on the first charge to its own loan and compares the total with the property's value. Each lender sets its own maximum for that combined figure, so ask before you apply.
The first charge lender's consent to a second charge is normally required before completion. Pricing sits higher than first charge bridging to reflect the subordinate position, typically 0.85% to 1.4% a month depending on the combined LTV and exit strength.
How lenders assess risk differently between the two
Second charge lenders scrutinise the first charge terms closely, because a first charge lender in arrears or enforcing possession can wipe out a second charge lender's position entirely. Underwriting will check the first mortgage's redemption balance, any cross-default clauses, and whether the first charge lender has consented in writing to a second charge being registered.
Deeds of priority and inter-lender agreements are standard on second charge deals, setting out exactly how proceeds are split on sale or default. Directors should expect a first charge lender to charge an administration fee for granting consent, and some first charge lenders refuse consent outright, which rules out a second charge structure on that property.
Costs to compare beyond the headline rate
Comparing first and second charge bridging on interest rate alone misses arrangement fees, exit fees, valuation costs and the first charge lender's consent fee, all of which affect the true cost of funds over the loan term. Second charge facilities frequently carry a higher arrangement fee, often 1.5% to 2.5% of the loan compared with 1% to 2% on a first charge deal, to reflect the extra legal work.
Solicitors' costs also differ: a second charge transaction needs the borrower's solicitor, the second charge lender's solicitor and sign-off from the first charge lender's solicitor, which adds a step and can add time compared with a straightforward first charge purchase or refinance.
Exit routes and how lenders test them
Every bridging lender, first or second charge, requires a credible exit before completion, usually a sale of the property, a refinance onto a term commercial mortgage, or proceeds from a development or trading event with a clear date. Second charge lenders test the exit particularly hard because they only get paid after the first charge, so a slow or uncertain sale process is a common reason for decline.
Refinancing a second charge bridge onto a single term facility once the exit event lands is common practice, consolidating both charges into one commercial mortgage and simplifying the security structure for future borrowing. Lenders will want to see this consolidation plan documented from the outset rather than assumed.
| Feature | First charge bridge | Second charge bridge |
|---|---|---|
| Repayment priority | Paid first on sale/default | Paid after first charge clears |
| How the loan-to-value limit works | Set by each lender on its own loan | Set by each lender on the combined total of both charges |
| Typical monthly rate (Sep 2026) | 0.55% to 0.95% | 0.85% to 1.4% |
| First charge lender consent needed | No | Yes, usually with a fee |
| Typical completion time | Varies by lender | Varies by lender; first charge lender consent adds a step |
| Best suited to | Purchases, standalone refinance | Releasing equity without disturbing an existing facility |
Step-by-step
- Establish the current balance and terms on any existing charge against the property
- Ask the first charge lender in writing whether they will consent to a second charge, and confirm any consent fee
- Get the property valued to establish usable equity above the first charge
- Compare first charge refinance against second charge structures on combined cost, not headline rate alone
- Agree the exit route and timeline with the lender before completion
- Instruct solicitors experienced in multi-charge bridging to manage the deed of priority
Illustrative example
A limited company held a commercial unit with an existing first charge mortgage at 45% loan-to-value. Rather than refinance that facility and lose its fixed rate, the company arranged a second charge bridge to release equity for a short-term stock purchase, with the first charge lender's consent obtained in advance and both facilities consolidated onto one term mortgage eight months later.
Frequently asked questions
Can a second charge lender force a sale if the first charge is up to date?
Yes, a second charge lender can still enforce its own security and force a sale if the borrower defaults on the second charge, even where the first charge is being paid on time. The first charge is simply repaid first from the proceeds, with the second charge lender recovering from what remains.
Do all first charge lenders allow a second charge to be registered?
No. Some first charge lenders, particularly certain high street banks, refuse consent to a second charge under any circumstances, which rules that route out entirely. Always confirm the first charge lender's position in writing before applying for second charge finance.
Is second charge bridging more expensive overall, or just the interest rate?
Both. Second charge bridging typically carries a higher monthly rate than first charge bridging on the same property, and arrangement fees and legal costs also tend to run higher because of the extra consent and priority documentation required.
Can a partnership with four or more partners use second charge bridging?
Yes, providing the partnership structure and the property title meet the lender's eligibility criteria, second charge bridging is available to limited companies, LLPs and partnerships with four or more partners on the same basis as first charge facilities.
How quickly can a second charge bridge complete once consent is granted?
How long it takes varies by lender and by how quickly the first charge lender gives consent, so ask each lender for its expected timescale before you commit.
By Adam Parker. Published · Last updated .