Owning multiple properties opens up interesting borrowing possibilities, yet many property owners don’t realise they can use their combined equity more effectively.
If you’ve got equity spread across other properties, you might be missing out on a funding option that could give you more borrowing power and better terms.
Cross charge bridging loans let you use multiple properties as security for a single loan, rather than limiting yourself to the equity in just one property.
In this guide, you’ll learn exactly how cross charge bridging works, who it suits best, and what you’ll need to consider before applying.
Property Charges
When you borrow money against a property, the lender adds what’s called a ‘charge’ to the property deeds.
This charge gives them security over the property and appears on records at the Land Registry.
A “first charge” is like having first rights to the property’s value.
Your main mortgage lender holds this position. If you were unable to pay your debts and the property needed to be sold, the first charge holder would be paid out before anyone else. Most homeowners have just one charge – their mortgage.
A second charge comes after the first and gives another lender rights to the property’s value, but only after the first charge holder has been paid.
Let’s say your house is worth £400,000 with a £200,000 mortgage. You could take out a second charge loan against the remaining £200,000 equity, but the original mortgage lender keeps their first charge position.
With cross charging, a bridging lender might take first charges on some properties and second charges on others.
A client in Surrey did exactly this – using a first charge on their unencumbered property and second charges on two mortgaged properties to secure a larger bridging loan.
You’ll need written permission from your current mortgage lender before adding any additional charges to a property. The position of the charge affects your borrowing costs too – second charges usually mean slightly higher rates because the lender is taking more risk.
Read more: Legal charges for bridging loans
Understanding Cross Charge Bridging Loans
A cross charge bridging loan uses the combined equity from several properties as security, instead of relying on just one property.
Think of it like putting all your property assets into one basket to maximise your borrowing potential.
For example, let’s say you’re a landlord in Reading with three buy-to-let properties worth £300,000 each, and you need to raise £400,000.
With a standard bridging loan using just one property, you might be limited to borrowing around £225,000. But by using a cross charge across all three properties, you could borrow the full £400,000 because the lender has more security.
What sets these loans apart from standard bridging finance is flexibility. You’re not tied to the equity in a single property, which often means better terms and higher borrowing amounts.
The lender places a legal charge across each property you include, creating a combined security pool that works in your favour.
Unlike normal bridging loans where a property valuation determines your maximum borrowing, cross charge arrangements look at the bigger picture.
A property developer in Leeds recently used this approach when buying a new development site. By using cross charges on two existing properties, they unlocked more capital than a traditional loan would allow.
Remember though – while using multiple properties can boost your borrowing power, it also means more than one property is at risk if things go wrong. That’s why having a clear plan for repaying the loan is essential.
Do you have to borrow 75% on all of the properties?
No, not at all. The percentage you borrow will be agreed between you and the lender, with a maximum per property of 75-80%.
Let’s talk bridging loans!
How Cross Charge Bridging Works
Cross-charge bridging works by spreading your borrowing across several properties.
Your broker will look at which properties you own and how to best use them as security. They might suggest placing first charges on properties you own outright and second charges on those with existing mortgages.
A business owner in East London wanted to buy commercial premises quickly.
She owned her home worth £500,000 with a £200,000 mortgage, plus a mortgage-free rental property worth £300,000. By using both properties as collateral, she could borrow more than if she’d used either property alone.
The lender took a second charge on her home and a first charge on the rental property.
Each property needs a separate legal charge, which means more paperwork than a standard bridging loan. Your solicitor will handle this process, making sure all charges are properly registered with the Land Registry.
Borrowing Amounts and Property Values
The amount you can borrow depends on the combined value of your properties and any existing mortgages. Lenders will look at the total equity available across all properties.
Most lenders accept residential, commercial, and mixed-use properties.
You’ll need a valuation for each property you include. These need to be recent – usually within the last three months. The surveyor will check each property’s condition and current market value.
Where the loan to value is low (less than 70%) the lender may choose an AVM valuation, which uses property data to get a valuation the same day.
The good news is that combining properties often leads to better terms as the lender achieves a lower overall LTV.
Who Uses Cross Charge Bridging?
Property Developers and Growing Portfolios
Property developers will use cross charge loans when they spot an opportunity but their cash is tied up in other projects.
Landlords Looking to Expand
Buy-to-let landlords find cross charge bridging useful when expanding their portfolios. They can tap into the equity to make quick purchases with no money down.
Business Growth and Opportunities
Business owners can turn to cross charge borrowing when they need quick capital. This could be to buy another business, a property or perhaps some stock.
It’s worth noting that cross charge bridging isn’t just for large property portfolios. Even owners of two properties might find this option useful when they need to borrow more than a single property’s equity would allow.
Benefits and Considerations
Advantages
Cross collateral bridging offers more borrowing power than single property bridging finance.
By pooling the equity from multiple properties, you can usually secure larger amounts than you would using just one property. A property investor recently borrowed £750,000 against three properties, whereas using just one property would have limited him to £250,000.
The security arrangements are more flexible too.
Your lender can mix and match first and second charges across your properties to create the best arrangement. Some of your properties might only need a small charge while others provide more substantial security – it all depends on your situation and what works best.
Key Considerations
Before you proceed, think about how a cross charge loan might affect your existing mortgages.
You’ll need formal permission from your current lenders to add extra charges to mortgaged properties. Some lenders might say no, while others might want to review your finances first.
Remember that using multiple properties means putting more assets at risk.
If something goes wrong and you can’t repay the loan, the lender has rights over all the properties you’ve used as security.
What happens if your lender says no?
This does happen from time to time, and brokers will be aware of these ‘awkward’ lenders.
If a lender refuses to grant permission for a second (or third) charge then you can’t secure a loan this way. Without additional assets you could have two options:
- Take out the existing mortgage by remortgaging to a new lender
- See if an equitable charge loan is a possibility
Working with a Broker
Securing short-term loans across multiple properties needs careful arrangement, which is why working with an experienced broker makes complete sense.
Brokers know which lenders offer these loans and, more importantly, which ones will suit your situation best.
- A good broker brings real value to the table.
- Brokers also help you dodge common pitfalls.
- Access to specialist lenders is another major benefit.
Many lenders who offer cross-charge options don’t deal directly with the public – they only work through brokers. These lenders often offer better terms and more flexible arrangements than mainstream options.
Your broker will also handle negotiations and paperwork, making the whole process smoother. They’ll work with valuers, solicitors, and lenders to keep things moving, giving you more time to focus on your project or business.
Alternative Options
While cross-charge bridge loans work well for many borrowers, they’re not your only choice.
Standard bridging loans work well when you only need to use one property as security. They’re simpler to arrange and might be all you need if you’re looking for a smaller loan amount.
Second charge mortgages offer a longer-term solution if you don’t need the money quickly. You’ll get more time to repay, though the application process takes longer and requires more extensive checks on your income.
Development finance might suit you better if you’re planning a major renovation or build project. These loans release money in stages as your project progresses, rather than as one lump sum.
Another option might be to remortgage and capital raise at the same time. This may incur early repayment charges and can take 8-10 weeks to set up.
Conclusion and Next Steps
Using cross charges can be a smart way to make your property portfolio work harder for you.
They offer more borrowing power and flexibility than standard short term loans, though you’ll need to weigh up the risks of securing debt against multiple properties.
If you’re considering this option, start by:
- Making a list of your properties and their current values
- Checking your existing mortgage agreements
- Working out exactly how much you need to borrow
- Speaking to a broker who understands cross charge bridging
Give us a call to discuss your plans – we’ll help you work out whether cross charge bridging is right for you and guide you through the next steps.
FAQ
Yes, you can potentially borrow 100% of a purchase price if you have enough equity in your other properties. The lender will look at the combined security value rather than just the purchase price.
Let’s say you want to buy a property for £200,000. If you own two other properties worth £400,000 with only £100,000 in mortgages, a lender might agree to fund the entire purchase price. They’re comfortable because they have substantial security across all properties.
Remember though – while you might not need a mortgage deposit, you’ll still need to cover other costs like legal fees, valuations, and arrangement fees. Also, having more of your own money in the deal often leads to better terms.
You’ll need at least two properties, this could be one you already own plus one you want to buy. There’s no maximum limit, but each property must be suitable security and undergo individual valuation.
Yes, but you’ll need permission from your current mortgage lenders. The amount of equity available in each property affects how much you can borrow.
Read more: Second charge bridge loans
Once valuations are complete and paperwork is in order, loans typically complete within 7-14 days.
Read more: How Quickly Can You Get a Bridging Loan?
Most UK properties are acceptable, including residential, commercial, and mixed-use. The key factor is each property’s marketability.
This depends on the combined value of your properties and any existing mortgages. Lenders typically offer up to 75% of the total available equity.
There’s no monetary maximum.
Most run for 3-12 months, though some lenders offer up to 24 months in certain cases.
Read more: How long can you have a bridging loan for?
Yes.
Yes, you’ll need a solicitor experienced in cross charge arrangements. They handle the legal charges and ensure proper registration.
Remember that bridging finance requires you to pay for the lenders legal fees, as well as your own.
Read more: Do I Need a Solicitor for a Bridging Loan?
Our minimum loan amount is £150,000.
