Get the facts on bridging loan legal charges – understand priority, consent requirements, and alternative routes when standard options don’t work.
When you take out a bridging loan, your lender puts a ‘legal charge’ on your property.
If you’ve been speaking to brokers or reading loan offers, you’ve probably seen terms like ‘first charge’ and ‘second charge’ thrown around. The terminology sounds formal and a bit intimidating, especially when you’re signing documents worth hundreds of thousands of pounds.
Here’s the thing – your mortgage lender has exactly the same arrangement. The charge simply gives them security, and specific rights until you’ve repaid what you borrowed.
Once you understand how it works, the concept is straightforward.
By the end of this article, you’ll know the difference between charge types and which one applies to your situation. You’ll also understand what happens if things don’t go to plan, and what to do if your mortgage lender refuses to let you borrow more.
That last bit catches a lot of people out, but there are solutions you probably haven’t heard about yet.
What a Legal Charge Actually Means
A legal charge is used to protect the lender when they provide a bridging loan.
It’s the formal way they secure their loan against your property, and it gets registered at the Land Registry – yes, that means it’s public record, just like your mortgage is.
The registration gives your lender specific legal rights.
If you can’t repay the loan, they have the right to repossess your property and sell it, to get their money back.
That sounds dramatic, but it’s exactly how your mortgage works too. You’ve probably never thought about it in those terms because you make your mortgage payments without issues.
What makes bridging loans different is that you might have more than one charge on the same property.
Maybe you’ve still got a mortgage, and now you need a bridging loan for your next property purchase. Both lenders have charges, but they’re not equal – one sits ahead of the other.
This is where the ‘order’ matters. If your property gets sold to repay debts, the lender with the first charge gets paid first. The second charge lender gets whatever’s left after that.
Understanding this priority system is the key to understanding why different charge types cost what they do.
First Charges – Pole Position
If you own your property outright – maybe you’ve paid off your mortgage, or you’ve inherited it, or you’re buying at auction – a first charge bridging loan gives you clean security.
The lender sits in first position, all by themself. Which means lower risk for them and better rates for you.
You’ll find first charges are the cheapest type of bridging finance because your lender knows they’re getting paid first if anything goes wrong. Most lenders will offer you up to 85% of your property’s value, sometimes more if you’re using multiple properties as security.
The registration process is simple too, because there’s no other lender to coordinate with.
The most common scenario is auction purchases. You’ve won a property at £300,000, and you need the money fast because auction completions don’t wait. A first charge bridging loan gets you the funds quickly, secured against the property you’re buying or another one you own outright.
Related: How Auction Bridging Loans Actually Work
How Charges Work With Mortgages
Long-term mortgages are always secured using a first charge.
Whether this is a residential mortgage, holiday let or buy to let, these lenders need to be first.
Second Charges – When You Already Have a Mortgage
How Second Charges Work
Your buy-to-let property is worth £400,000 and you’ve got a £150,000 mortgage on it.
If you took out a second charge bridging loan, this sits ‘behind’ your mortgage lender in the priority queue.
Position No. 2
If you couldn’t repay and the property sold for £400,000, your mortgage lender would get their £150,000 first. Then the bridging lender gets paid from what’s left.
This subordinate position means second charges cost more.
Your bridging lender is taking extra risk because they might not get all their money back if property values fall or if there’s not enough equity to cover both loans.
But there’s a big benefit – you can access your property’s equity without disturbing your existing mortgage or triggering early repayment charges.
You’ll see second charges used for all sorts of reasons.
Maybe you need a deposit for your next investment property, or you’re funding a development, or you need cash to complete a refurbishment before refinancing. The key is that you’re keeping your existing mortgage in place while borrowing more against the same property.
Specialist Charge Structures for Portfolio Owners
If you own multiple properties, there are more sophisticated ways to structure your security that most people never hear about.
These aren’t everyday options, but they solve specific problems when you’re working with a property portfolio.
A cross-charge links several properties together as security for a single loan.
Each property provides mutual security for the others through first legal charges. Say you own three properties worth £500,000 each – a cross-charge would let all three secure one bridging loan, usually giving you better terms than three separate loans would.
Blended charges mix things up differently.
You might have a first charge on one property and second or equitable charges on others, all securing the same loan. This gives you flexibility when some properties are unencumbered and others have existing mortgages.
Comfort charges are something else entirely – they’re arrangements that private banks offer to high-net-worth clients based on the banking relationship rather than standard lending criteria. You won’t find these advertised, and they work very differently from conventional security.
These structures get complex quickly, which is why you’ll need a broker who works in this space regularly. Not all lenders offer them, and knowing which ones do – and when each structure makes sense – takes specialist knowledge.
Getting Lender Consent
Most mortgage deeds include a clause saying you need formal permission before taking out another loan against the property.
This could be a secured loan or a bridging loan.
Your mortgage lender gets to say yes or no, and sometimes they do refuse consent.
Why would they refuse?
Sometimes it’s about risk management – they’re worried about your overall debt levels getting too high.
Other times it’s about control – they want to manage how much lending sits on their security. Some lenders just have policies against allowing second charges at all, full stop.
The good news is that under UK law, lenders must act in good faith when making these decisions. The Macdonald Hotels case established that they can’t refuse unreasonably. If the refusal doesn’t make sense for valid lending reasons, you can challenge it.
But even if they won’t budge, you’re not completely stuck.
That’s where the next type of charge comes in – one that doesn’t need their permission at all.
Equitable Charges – The Alternative Route
An ‘equitable charge‘ takes a different approach. This type of lending is very specialist and only available from certain lenders.
Instead of registering a full legal charge at the Land Registry, it creates a binding agreement based on property law principles.
The lender can’t automatically sell your property if you default – they’d need to get a court order first – but it’s still proper, enforceable security.
Think of it as a workaround when the standard route is blocked. Your mortgage lender’s consent isn’t required because the equitable charge works differently from a legal charge.
It creates a valid interest in your property without going through the same registration process that would trigger your mortgage lender’s power to refuse.
You might wonder if this means it’s weaker security. It’s not – it’s just enforced differently.
If you couldn’t repay, your lender would apply to the court for permission to sell, and assuming the debt is legitimate, they’d get it. The process takes a bit longer than a legal charge would, which is why lenders charge more for it.
Most equitable charges eventually convert to full legal charges once the situation changes.
Maybe you pay off your mortgage, or you refinance onto a lender who allows second charges. The equitable charge does the job in the meantime, giving you access to your equity when you need it.
When the Premium Is Worth Paying
Yes, equitable charges cost more – lenders charge a premium because they’re taking extra risk with that court enforcement process.
But if your deal is time-sensitive, or if challenging your lender’s refusal would take weeks you don’t have, paying the premium can be worth it to get your transaction done.
Say your mortgage lender refuses second charge consent due to their lending policy. You’ve found an investment property that’s genuinely undervalued, but it’ll sell quickly.
An equitable charge gives you access to the £80,000 equity you need without waiting for appeals or negotiations with your mortgage lender. You pay more in interest, but you secure the deal.
What This Means for You in Practice
So which charge type do you need?
If you own your property outright, or you are buying a property, you’re looking at a first charge – a straightforward option with competitive rates.
Got an existing mortgage and your lender agrees?
A second charge makes sense, letting you access equity without disturbing your mortgage.
Mortgage lender says no? That’s when equitable charges can be considered.
You’ll need to budget for legal costs whichever route you take. Both your lender and you will need solicitors to handle the registration and documentation.
The timescales vary too – first charges can complete in days, second charges take a bit longer while consent is sorted, and equitable charges sit somewhere in the middle.
When situations get complex – you’re working with multiple properties, facing consent refusals, or trying to optimise borrowing across a portfolio – speaking with an experienced broker who understands these structures makes absolute sense.
Not all lenders offer equitable charges (or second charges), and knowing which ones do saves you time when speed matters.
Conclusion
Legal charges might have sounded complicated at the start, but you now understand the fundamentals: first charges for unencumbered property and purchases, second charges when you have a mortgage, and equitable charges when consent becomes an issue.
The system isn’t as mysterious as the terminology makes it sound.
If you’re facing a consent refusal or working with multiple properties, speaking with a specialist broker who understands these structures – and has relationships with lenders offering each type – makes the process much smoother.
You’ve got options, even when the obvious route gets blocked.
Get Your Bridging Loan Quote Today
Speak to a bridging finance specialist now. Our initial consultation is free and without obligation – we’ll assess your requirements and explain your options clearly.
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