Commercial Second Charge Loans: Raising Money Without Remortgaging

A commercial second charge is a loan secured on a property behind an existing first mortgage. If the property were sold, the first lender is repaid first and the second lender next. Because it takes more risk, the second lender charges more, but you keep your existing mortgage exactly as it is.

That is the whole point of a second charge. If you have a cheap first mortgage, or a big early repayment charge, a second charge lets you raise money without touching it.

This guide covers when it makes sense, how much you can borrow, consent, costs and the alternatives. For the bigger picture, see our commercial mortgage guide.

What is a commercial second charge loan?

It is extra borrowing secured on commercial property that already has a mortgage. The original mortgage stays in place. The new lender registers a second charge behind it. Most lenders cap total borrowing across both loans at around 65% to 75% of the value, and the business must be able to afford both payments.

When does a second charge make sense?

• Your first mortgage has a low rate you want to keep
• Remortgaging would trigger a large early repayment charge
• You need money quickly
• Your first lender will not lend more

Which situations do lenders see most?

These are illustrative situations, not Option Finance client outcomes.

How much can you borrow?

Lenders look at the combined borrowing. Many cap first and second charges together at around 65% to 75% of the property’s value.

Do you need your first lender’s permission?

Often, yes. Many commercial first lenders require their consent before a second charge is registered. Check your loan agreement. Arranging consent can add time, and some lenders charge a fee for it. Charges are registered at HM Land Registry, and you can see what is already registered against your property through the Land Registry service.

What do lenders check?

• The property’s value and the balance on the first mortgage
• Affordability: business profits or rent must cover both loans
• Your credit record and other borrowing
• What the money is for, such as expansion, equipment, tax or buying out a partner
• Your exit, for shorter loans, how you will repay

Second charge or bridging?

A second charge can be a long-term loan repaid monthly, or short-term bridging repaid when you sell or refinance. If you need money for a few months while a sale completes, a second charge bridge may suit. See our bridging loan guide.

Is a second charge regulated?

Commercial second charges are usually unregulated. If the loan is secured on a property where you or close family live in at least 40% of it, it is likely to be regulated. The FCA sets this out in PERG 4.4 of its Handbook.

What does it cost?

• Higher interest rate than a first charge
• Arrangement fee
• Valuation and legal fees
• Possibly a fee from the first lender for consent

Frequently asked questions

Speak to Option Finance about raising money

Tell us about the property, your current mortgage and what you need. We will compare a second charge with remortgaging and tell you straight which works out cheaper.

Book a free initial consultation using the enquiry form below. See also our commercial mortgage advice and commercial remortgage guide.