Third charge bridging loans

A bridging loan with a third charge is a specialist form of bridging finance where the lender takes a third-ranking legal charge behind an existing first and second charge on a property. While less common than first or second charge bridges, third charge bridging loans are achievable in the right circumstances and are used where a borrower has sufficient remaining equity and a clear short-term funding need.

How Third Charge Bridging Loans Work

In a third charge structure:

• The first charge is usually a residential or buy-to-let mortgage
• The second charge may be another mortgage or secured loan
• The bridging lender takes a third charge against the property

The lender’s security sits behind the earlier charges, so risk is higher. As a result, these loans are:

• More selectively underwritten
• Typically offered at lower loan-to-value (LTV)
• Priced higher than first or second charge bridging loans

When Third Charge Bridging Is Used

Third charge bridging loans are most commonly used where:

• The borrower has significant equity but does not want to disturb existing borrowing
• Refinancing the first or second charge would trigger early repayment charges
• The funding requirement is short term and time critical
• The loan is being used for investment, auction purchases, or bridging a deposit

They are often used by experienced investors and portfolio landlords who want to unlock trapped equity quickly.

Key Lending Criteria

Lenders will focus heavily on:

• Combined loan-to-value (CLTV) across all charges
• The quality and marketability of the property
• A clear and credible exit strategy, usually a sale or refinance

Third charge bridges are usually capped at a conservative CLTV, often significantly lower than standard bridging limits.

Consent and Legal Requirements

For a third charge bridging loan to proceed:

• The first and second charge lenders must give consent
• Full legal due diligence is required
• Independent legal advice (ILA) may be required for the borrower

Because of the complexity, legal costs are typically higher than standard bridging loans.

Exit Strategies

Typical exits include:

• Refinancing the entire debt stack into a single loan
• Sale of the property
• Sale or refinance of another asset used to repay the bridge

Lenders will only proceed where the exit comfortably clears all prior charges.