First Charge

A first charge is the primary legal security interest registered against a property. In the event of a default and sale, the first charge holder is repaid from the sale proceeds before any other secured creditors. Because of this priority position, first charge lenders carry less risk and can offer lower interest rates than second charge lenders.

A typical first charge on a residential or commercial property is a mortgage. If a business wants to borrow additional funds against a property that already has a mortgage, the new lender takes a second charge (subordinate to the mortgage). Second charge lenders assess whether sufficient equity exists above the first charge to secure their lending.

For bridging loans and commercial mortgages, lenders will check the Land Registry to confirm the existing charge position before offering terms. Any existing charges must be disclosed honestly in the loan application.

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