Equitable Charge Bridging: when your lender says no to a second charge
Your mortgage lender has refused consent for a second charge, and the equity is still sitting there. An equitable charge is the workaround that most borrowers, and plenty of brokers, have never heard of. Here is how it works and when it makes sense.
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Legal charge versus equitable charge, in plain English
A normal second charge is a legal charge, registered at the Land Registry, and that registration needs your first mortgage lender to say yes. Some simply won't, as a matter of policy, however good your position is.
An equitable charge takes a different route. It binds without Land Registry registration, so it doesn't need the first lender's consent to exist. The lender instead protects itself with a restriction on the title and the loan agreement itself.
"Most people who get refused consent think that's the end of it. It usually isn't. It just means the deal moves to a smaller list of lenders who know exactly what they're doing."
What lenders want on an equitable charge deal
- The consent refusal in writing, and refused on policy grounds, not because your mortgage is in arrears
- A sensible combined loan to value, ceilings run a little lower than a consented second charge
- Standard residential property behind a mainstream first mortgage, flexible and offset mortgages complicate things
- The usual: a clear exit and a clean story
Equity is the whole deal here. Because enforcing an equitable charge takes a court order rather than a simple power of sale, lenders treat it as higher risk, and the equity in your property is the security that makes them comfortable. In practice that means the combined loan to value, your mortgage plus the new loan, usually tops out around 65% to 75%, and the rate runs a little higher than a consented second charge to reflect the risk. The more equity you've left in the property, the better the deal looks. The other difference is the lender list, which is short, and the paperwork, which has to be right first time.
Your questions
What is an equitable charge on a property?
A way for a lender to secure a loan against your property without registering a legal charge at the Land Registry. It binds through the loan agreement and a restriction on the title instead, which is why it doesn't need your mortgage lender's consent.
What is the difference between a legal charge and an equitable charge?
A legal charge is registered at the Land Registry and gives the lender an automatic power of sale if things go wrong. An equitable charge isn't registered in the same way, and the lender would need a court order to enforce it. That's exactly why lenders want more equity in the property and price it a touch higher.
My mortgage lender will not consent to a second charge. What are my options?
Three, usually. Ask again properly, because some refusals are really just slow paperwork. Remortgage the whole lot, which costs you your current rate. Or an equitable charge bridge, which leaves your mortgage untouched and needs no consent. Which one wins depends on your numbers, and we'll run them with you.
Can I sell my house with an equitable charge on it?
Yes, but the loan gets repaid from the sale, the same as any secured borrowing. The restriction on the title means your solicitor deals with the lender as part of the sale. It doesn't trap you in the property.
How much equity do I need for an equitable charge loan?
More than a standard second charge. Most lenders want the combined borrowing, your mortgage plus the new loan, to sit around 65% to 75% of the property value. The more equity left over, the more comfortable the lender and the better your terms.
Does an equitable charge cost more?
Usually a little more than a consented second charge, because the lender carries more risk and the lender list is smaller, so there's less shopping around. We'll show you the real comparison in writing.
Got a deal like this on your desk?
Tell us the numbers and we'll tell you honestly what's achievable.
Prefer to put it in writing? Email support@bridgingfinancebroker.co.uk