£104,000 Second Charge Bridge to Stop a Bankruptcy Petition — And What It Actually Cost

A business owner needed £70,000 to settle business debts and mortgage arrears, with a creditor already pursuing bankruptcy proceedings. We arranged a £104,000 second charge bridge secured against his home. Funds released three working days after consent. Below is the case in full, including every fee.

The situation

The client came to us needing £70,000 at short notice. Most of it was to clear business debts, with the balance settling arrears that had built up on the mortgage over his home.

One of his creditors had begun bankruptcy proceedings. That put a hard deadline on the whole thing, and left no room for a conventional application even if one had been likely to succeed.

Why the high street couldn't help

Two problems. The arrears themselves closed most mainstream doors, regardless of how the underlying business was performing. And the timescale ruled out anything running to a normal underwriting calendar.

What he did have was equity. His home was worth £450,000 with £209,000 outstanding on the first charge — a mortgage worth keeping, and one he would have struggled to replace given the arrears sitting on it.

That pointed to a second charge: a lender prepared to sit behind the existing mortgage rather than refinance it.

What we arranged

We placed the case with a lender able to take a second charge behind the existing first charge, leaving that mortgage untouched.

Because the funds were predominantly for business purposes, the loan was assessed on commercial criteria — security, exit and speed — rather than the affordability testing the arrears would have failed.

The lender approached the first charge lender for consent, which was given. Funds released three working days later.

Sizing the facility

The client needed £70,000 in hand. The facility was £104,000.

That gap is the part borrowers most often misjudge. On a retained-interest bridge, the fees and the full term's interest come out of the loan on day one. You don't borrow what you need — you borrow the figure that nets down to what you need.

At 70% loan to value across both charges, the maximum available was £106,000: 70% of £450,000 is £315,000, less the £209,000 first charge. The facility was set just under that, and netted down to £79,887 released on day one.

The numbers in full

Value of security	£450,000
First charge outstanding	£209,000
Second charge facility	£104,000
Combined loan to value	70%
Interest rate	1.35% pcm, retained
Interest per month	£1,404
Minimum term	9 months
Maximum term	12 months
Arrangement fee	£3,120
Admin fee	£650
Loan management fee	£1,495
Broker fee	£2,000
Interest retained (12 months)	£16,848
Exit fee	One month's interest (£1,404)
Commitment fee	£350
Valuation	Paid by the client
Net release on day one	£79,887

Retained interest means what it says: the interest was taken out of the loan at the start rather than paid monthly. For a borrower whose cash flow was already stretched, having no monthly payment to find mattered as much as the money itself.

What it cost

We'd rather set this out than skate over it.

Fees came to £7,265. Held to the nine month minimum term, interest came to £12,636, with a further £1,404 exit fee. Total cost of the facility: a little over £21,300 on £104,000 borrowed.

That is not cheap money and we won't pretend otherwise. A second charge position, recent arrears and live creditor action all price in. What it was, was available money, at a point when nothing cheaper was on the table and the alternative was bankruptcy.

The exit

The client remortgaged at six months.

Because the facility carried a nine month minimum term, redeeming early didn't save six months of interest — it saved three, and the exit fee still applied. By that point the arrears were cleared and his position had recovered enough for mainstream lending to be available to him again.

That is the whole point of a bridge. It buys the time for a permanent solution to become possible.

What this case shows

A second charge protects a good first charge. Refinancing the whole mortgage would have meant replacing a facility this client couldn't easily have replaced. Sitting behind it kept that intact.

Speed comes from the exit, not the credit file. The lender wasn't underwriting his past. It was underwriting a credible route out.

Retained interest is a cash flow tool, not free money. No monthly payment is genuinely useful when cash is tight. The interest is still charged — it's simply taken up front.

Ask what nets down. A headline facility figure tells you very little. The number that matters is what lands in the account.

When this isn't the answer

Bridging against your home to clear debt is a serious step and it is not right for everyone. It works when there is a real, dated exit — a remortgage, a sale, an incoming payment. Without one, it moves the problem rather than solving it, and the security is your house.

If you are facing creditor action and you are not certain borrowing is the right route, free impartial advice is available from MoneyHelper and Citizens Advice. We would rather tell you a bridge is wrong for you than arrange one that is.

Facing something similar?

If you need to raise money against property at short notice and the high street has said no, tell us what you're dealing with and we'll tell you honestly whether it's doable — and what it would cost.

Talk to us about your case