A second charge bridging loan costs less than a remortgage when your current mortgage rate is lower than today’s rate and you only need the extra cash for a short time. A remortgage costs less when your current rate is the same or higher, or when you will carry the debt for years. At Expert Mortgage Brokers in Limehouse, East London, we compare both routes for homeowners and property investors across the UK. This guide gives you the test to run before you choose.
What is the difference between a second charge bridging loan and a remortgage?
A remortgage replaces your existing mortgage with a new, bigger one. A second charge bridging loan sits behind your existing mortgage and leaves it alone.
With a remortgage you have one lender and one loan. The whole balance moves to the new rate. You pay the new lender’s fees. If you are still inside a fixed deal, you also pay an early repayment charge to the old lender.
With a second charge you have two loans. Your first mortgage keeps its rate and terms. The new lender ranks second, behind your first lender, if the property is ever sold. That extra risk is why a second charge costs more per pound borrowed, and why bridging lenders price it by the month. It is short-term finance. You repay it from a sale or a refinance.
When does a second charge bridging loan cost less?
A second charge costs less when your current rate is below today’s rate and you need the money for months, not years. The new rate only applies to the new money. Your existing balance keeps its cheaper rate.
It also avoids the early repayment charge, because you leave your first mortgage in place. A broker writing in Mortgage Solutions made the same point about clients who would lose a favourable existing rate by moving to a new contract with their lender.
A second charge suits a short job: a deposit for a purchase, a refurbishment, or a gap before a sale or refinance.
When does a remortgage cost less?
A remortgage costs less when your current rate is the same as or higher than today’s rate, or when you plan to hold the debt for years. Bridging is priced by the month, so the cost grows with every month you hold the loan. A mortgage is built for the long term.
A remortgage is also simpler. You deal with one lender and make one monthly payment. If your first lender refuses consent for a second charge, a remortgage is usually the route left open.
How do you compare the two? The blended cost test
Add up every cost of each route over the number of months you will actually hold the debt. Run it in four steps.
- Pick your holding period in months. Add a safety margin if your exit depends on a sale.
- Cost the remortgage. Take the new rate, apply it to the whole balance for those months, then add the new mortgage fees and any early repayment charge on your old mortgage.
- Cost the second charge. Take your current rate on your existing balance, add the bridging monthly rate on the new money, then add the arrangement fee.
- Compare the two totals. The lower total wins, as long as you can repay the bridge on time.
Here is the test on the same borrowing from two different starting points. You want £50,000 on top of a £200,000 mortgage, and you will hold the debt for nine months.
| Scenario A: current rate 3.0%, 3% early repayment charge | Scenario B: current rate 6.5%, no early repayment charge | |
| Remortgage to £250,000 | £11,250 interest + £1,000 fees + £6,000 early repayment charge = £18,250 | £11,250 interest + £1,000 fees = £12,250 |
| Keep £200,000, add £50,000 second charge | £4,500 + £4,050 + £1,000 arrangement fee = £9,550 | £9,750 + £4,050 + £1,000 arrangement fee = £14,800 |
| Cheaper route | Second charge, by £8,700 | Remortgage, by £2,550 |
This is an example only. It assumes interest-only payments, a new rate of 6.0% a year, a second charge at 0.9% a month, a 2% arrangement fee, and no legal or valuation fees. These are invented figures, not current rates and not a quote.
The same borrowing flips from one winner to the other. Your current rate and any early repayment charge decide it.
Does your mortgage lender have to agree to a second charge?
Yes, in most cases. Your first lender’s terms or a restriction on your title usually require its consent, and some lenders refuse. Land Registry publishes a form for exactly this, used when a restriction on the register requires a consent before a change can be registered.
Ask early. A refusal closes the second charge route on that property, and a remortgage becomes the main alternative. Read our full guide to second charge lender consent before you commit to valuation and legal fees.
Are second charge bridging loans regulated?
Regulation turns on who borrows and who lives in the property. A loan to an individual, secured on a property where the borrower or a close relative lives in at least 40% of it, is a regulated mortgage contract under FCA rules. A loan to a company, secured on a property nobody will live in, is not.
FCA guidance also excludes certain second charge bridging loans from the regulated definition. We confirm the exact position for your case before you apply. If your loan is regulated, your home can be repossessed if you fall behind. Our page on regulated bridging loans explains the 40% test in full.
What is the exit for a second charge bridging loan?
The exit is how you repay the loan, usually from a sale or a refinance onto a mortgage. Lenders look at the exit before almost anything else, and it must fit inside the loan term.
A sale exit needs a realistic price and a realistic timescale. A refinance exit needs a new lender to agree to lend against the property’s value when the bridge ends. Keep a backup exit in case the first one slips. Our guide to bridging loan exit strategies covers each option.
How does Expert Mortgage Brokers help with second charge bridging loans?
Expert Mortgage Brokers in Limehouse, East London arranges bridging loans, including second charge bridging loans, for homeowners and property investors in Tower Hamlets, Canary Wharf, Newham and across the UK. We run the blended cost test with you, check consent before you commit, and tell you plainly when a remortgage is the cheaper route.
Speak to Jahed Mirza, CeMAP, on 020 7183 1119 or book a free consultation.
Frequently asked questions
Is a second charge bridging loan cheaper than a remortgage?
It is cheaper when your current mortgage rate is lower than today’s rate and you need the money for a short time. A remortgage is cheaper when your current rate is the same or higher, or when you hold the debt for years. Run the blended cost test to check.
Can I get a second charge bridging loan without my lender’s consent?
Not in most cases. Your first lender’s terms or a restriction on your title usually require its consent before the second charge is registered. Some lenders refuse, so ask early.
How long does a second charge bridging loan last?
A second charge bridging loan is short-term finance, and the lender sets the term in months. Your exit, a sale or a refinance, must fit inside that term.
Do I lose my current mortgage rate with a second charge?
No. Your first mortgage stays in place on its existing rate and terms. Only the new money carries the second charge rate.
Can I use a second charge bridging loan to buy another property?
Yes. Many investors raise a deposit by borrowing against a property they already own. The loan is secured on that property, so your first lender’s consent applies, and your home is at risk if it is the security.
This guide is general information, not personal advice. A bridging loan is secured on property, which can be repossessed if the loan is not repaid. Expert Mortgage Brokers is a trading name of LQ Property Finance Ltd, authorised and regulated by the Financial Conduct Authority (FCA Ref: 758816). Registered in England and Wales. Registered office: 162 Goodmayes Lane, Ilford, IG3 9PR. Trading address: 558 Commercial Road, Limehouse, London E14 7JD.
Sources: FCA Handbook, PERG 4.4 | Land Registry form RXC | Mortgage Solutions