The Client
The client had an initial enquiry for bridging finance. He held a residential property in London valued at £760,000, with an existing mortgage of £300,000.
The Scenario
The client wanted to raise £200,000 as a second charge via bridging finance, needing the funds quickly to carry out work on another residential property. As a second charge regulated transaction, the loan-to-value was limited to 60%, at a rate of 0.8%. Against the London property alone, this only allowed £156,000 to be raised – short of the £200,000 needed.
The Solution
After further discussion, we established that the client’s second property was worth £3,000,000, with an existing mortgage of £470,000. We secured one loan against both properties, bringing the aggregate loan-to-value across the combined security down to around 26% for the full amount needed, and reducing the rate to 0.75%.
This suited the client’s needs well, since the exit strategy was to sell the London property. He only needed the funds for a short term, and the loan completed within a two-week period.
Summary
Current maximum loan-to-value for bridging finance sits around 75% on first charge bridges, typically lower on second charge bridges at around 60%. Where a single property cannot support the amount needed on its own, using additional property as combined security can bring the loan-to-value down significantly and unlock a better rate.
Frequently Asked Questions
What is a second charge bridging loan?
A second charge bridging loan sits behind an existing mortgage on the same property, rather than replacing it.
It allows funds to be raised quickly without disturbing the first charge mortgage already in place.
Why is loan-to-value lower on a second charge bridging loan?
Second charge lenders take on more risk, since they rank behind the first charge lender if the property is sold.
This is typically reflected in a lower maximum loan-to-value, often around 60% compared to up to 75% on a first charge bridge.
Can I use more than one property as security for a bridging loan?
Yes, using multiple properties as combined security can bring the overall loan-to-value down considerably.
This can unlock a larger loan amount, a better rate, or both, compared to relying on a single property alone.
What happens if a bridging loan cannot raise enough on one property?
It does not necessarily mean the case cannot proceed.
Where the borrower holds other property, structuring the loan against multiple assets together can raise the full amount needed at a lower blended loan-to-value.
Commercial Finance Network is a whole-of-market FCA authorised commercial finance broker working with property investors, developers, and businesses across the UK and internationally. We work across the full specialist bridging panel and will tell you which lenders will engage with your deal, what LTV and rate to expect, and how to structure the application before anything is submitted.
Commercial Finance Network is directly authorised and regulated by the Financial Conduct Authority. Your home may be repossessed if you do not keep up repayments on your mortgage.
Call us on +44 1494 622 111 or email info@cfnuk.com to speak to a specialist directly.
Related Pages
- Bridging Loans – fast, flexible funding secured against property
- Second Charge Mortgages – raising capital while protecting your existing mortgage rate
- Bridging Loan 75% LTV – what is actually possible on maximum loan-to-value bridging
- Bridging Loan Calculator – estimate monthly interest and total borrowing costs