What is a first charge short-term loan? It is the initial size of a loan on a property. The design of this loan is to help an individual achieve their short-term financials.
The borrower pledges their property as collateral for this type of loan. There is, however, a limit on the amount the lenders can lend the borrower.
The lenders usually set the “maximum threshold”. For instance, the limit can be around 75% of the overall value of the borrower’s property. Therefore, if the borrower cannot repay the loan, the lender can seize the property and sell it to recover some of their loss or all of their losses.
Therefore, if the value of the property is £800,000 and the property owner wants to borrow the first charge loan and pledge the property as collateral, then the maximum loan the lender can offer the property owner of this property is not likely to be over £600,000. This is 70% of the property’s value that the property owner wants to use as collateral.
The borrower can use the difference in equity, which is around £200,000 in this example, for a commercial bridge loans. However, this will depend on the finances of the proprietor and the value of the borrower’s property.
Borrowers usually borrow first charge short-term loan to purchase an investment property and complete refurbishing their investment property. If you, therefore, find a property and you need to purchase it immediately, you can borrow this type of loan. You can use the cash to pay for the property.
Lenders accept different securities, including student accommodation, HMOs, multi units, semi-commercial property, commercial properties, such as B&Bs, pubs, hotels, retail units, and offices, and investment property.
Here are the features of the product:
No ERCs / no exit fees
Asset-based decisions
Terms from 3 to 24 months
Loans from £50k to £10m
Up to 70% of LTV
Rates from 0.65%
