Mortgage gap finance
Short-term funding that covers the difference between what your mortgage lender will advance and what the transaction actually needs — so a shortfall discovered late does not cost you the deal.
Start the fact find- Typical amount
- £25,000 to £500,000
- Typical term
- 3 to 18 months
- Security
- Usually a second charge
- Timescale
- 1 to 4 weeks
Indicative market ranges at the time of writing, not offers or quotes. What is available to you depends on the lender, your circumstances and the security available.
What gap finance actually is
A gap appears when the money available and the money required stop matching. The valuation comes in below the agreed price. The lender caps the advance at a lower loan-to-value than expected. A sale that was funding your deposit slips by six weeks. Costs land higher than budgeted. The deal itself is still sound — the funding just no longer reaches.
Gap finance covers that shortfall. It usually sits behind the main mortgage as a second charge, which means your primary lender keeps first call on the property and the gap lender ranks after them. Because it is riskier for the lender in that position, it costs more than the mortgage in front of it and it is designed to be short-lived.
Two things decide whether it is possible at all. The first is whether your primary lender will consent to a second charge — many will, some refuse outright, and a few charge a fee simply to consider it. The second is your exit: a clear, evidenced route to repaying the gap within months rather than years.
It is expensive money used briefly and deliberately, and the right question is never whether it is cheap. It is whether losing the transaction, forfeiting a deposit or missing a completion deadline would cost you more than the funding does.
When gap finance is the right tool
The pattern is always the same: a sound transaction, a temporary shortfall, and something specific that will close it.
A down valuation
The surveyor values below the agreed price, so the lender's advance drops while the price does not. Gap funding covers the difference where you still want the property and the seller will not reduce.
A loan-to-value cap
The lender approves the case but only to 65% or 70% when the deal was built on 80%. Rather than losing it, the balance is funded short-term and refinanced later.
A delayed sale
The property funding your deposit has not completed and the purchase deadline will not move. The gap is repaid the moment the sale goes through.
Costs that came in higher
Stamp duty, VAT, professional fees or works priced above budget. Small individually, but together enough to leave a completion short.
A deadline against illiquid funds
The money exists — in a business, an investment, a policy maturing next quarter — but not in cash on the required date.
Topping up a commercial purchase
Commercial mortgages sit at lower loan-to-values than buyers expect. Gap funding bridges the difference on an otherwise strong acquisition.
How a gap case runs
- 1
You complete the fact find, setting out the primary mortgage, the shortfall and your exit.
- 2
We check whether your primary lender permits a second charge and approach funders who fit.
- 3
Indicative terms come back, showing the total cost over the term rather than a monthly rate alone.
- 4
Valuation and legal work complete alongside the main mortgage, and both draw down together.
Ready to put the case together?
The fact find focuses on the two things that decide these cases: what your primary lender permits, and how the gap gets repaid.
What a gap lender needs to see
Gap funding moves quickly, but only when the picture is complete on day one. The exit is the part that decides it — an unevidenced plan to sell 'at some point' will not get terms, however good the property.
- The primary lender's offer or decision in principle, including the amount and any expiry date.
- Written confirmation of whether that lender will consent to a second charge.
- A clear statement of the total funds needed and exactly where the shortfall arises.
- An evidenced exit: a memorandum of sale, an agent's listing, or a refinance decision in principle.
- A backup exit, because every lender will ask what happens if the first one slips.
- Details of all existing charges and restrictions registered against the title.
- A solicitor able to act quickly — second charges fail on legal delay more than anything else.
What it costs
Gap funding is priced monthly, like bridging. The headline numbers look small and add up quickly, so always work in total cost over the term.
Monthly interest rate
Quoted per month rather than per year. A rate of 1% a month is over 12% annually. Second-charge positions price higher than first-charge lending because the lender ranks behind.
How interest is paid
Serviced monthly, rolled up and settled at the end, or retained from the advance at the outset. Retained and rolled-up options mean you receive less or owe more, so compare the net figure.
Arrangement fee
Commonly a percentage of the facility, usually deducted from the advance. Check whether the amount quoted is what you receive or what you owe.
Primary lender consent fee
Some first-charge lenders charge simply to consider a second charge, and the fee is payable whether or not they agree.
Valuation and legal costs
A separate valuation is often required even where the primary lender has already done one, and you will pay both solicitors.
Exit and extension fees
Some facilities charge on redemption. Extending beyond the agreed term is always expensive — build realistic contingency into the term you request.
The words you will meet
Second-charge lending has its own vocabulary, and it is worth understanding before comparing quotes.
- First and second charge
- The order lenders are repaid from a sale. The first charge — your main mortgage — is settled in full before the second sees anything, which is why second-charge money costs more.
- Consent to second charge
- Formal permission from your primary lender to register another lender's charge behind theirs. Without it the case cannot proceed, whatever the merits.
- Combined loan to value
- Both loans added together as a percentage of the property's value. Gap lenders typically cap this around 75%, so the room available depends on how much the first charge already uses.
- Exit
- The specific event that repays the facility — a sale completing, a refinance drawing down, funds arriving. Lenders underwrite the exit more heavily than the security.
- Retained interest
- The lender holds back the term's interest from the advance up front. Nothing to pay monthly, but you receive less on day one and the loan is grossed up accordingly.
- Standard security
- The Scottish equivalent of a charge. Second-ranking security works differently north of the border, so tell us early if the property is in Scotland.
Regulated and unregulated gap funding
Where the property is, or will be, occupied by you or an immediate family member, second-charge lending secured on it is a regulated activity and carries the full consumer protections that go with that — including affordability assessment and, in most cases, access to the Financial Ombudsman Service.
Where the property is a pure investment or a commercial asset held for business purposes, the funding generally falls outside the regulated regime and those protections do not apply in the same way.
The distinction is not a technicality and it is not yours to work out. We confirm in writing which applies to your case before you commit to anything, along with how we are paid on it.
Frequently asked
Will my mortgage lender allow this?
It depends entirely on the lender. Many permit a second charge subject to their consent and a fee; some refuse as a matter of policy. It is the first thing we check, because there is no point building a case that the first-charge lender will veto.
How quickly can it complete?
One to four weeks is typical, though it is often governed by how fast your primary lender responds to the consent request rather than by the gap lender. A solicitor who has done second charges before makes a noticeable difference.
Is this the same as a bridging loan?
It is closely related and often the same lenders. The distinction is position and purpose: a bridge is usually a first charge funding a whole transaction, while gap finance sits behind an existing mortgage and funds only the shortfall.
What if my exit is delayed?
Talk to us early rather than at the deadline. Extensions are usually possible but expensive, and the cost rises the later it is raised. This is exactly why lenders ask for a backup exit at the outset.
Can I use it as a long-term top-up?
No, and you should be wary of anyone suggesting otherwise. Gap funding is priced for months, not years. If what you actually need is permanent additional borrowing, a different structure will serve you far better and we will say so.
Can I get it with adverse credit?
Often, yes. Short-term lenders weigh the security and the exit more heavily than credit history. It narrows the panel and raises the price, but a satisfied judgment with a clear explanation rarely stops a well-evidenced case.
Before you borrow
- Your property may be repossessed if you do not keep up repayments on any loan secured against it. A second-charge lender can enforce in the same way as a first.
- Gap finance is short-term. If your exit does not materialise, extension costs escalate quickly and the position can deteriorate fast.
- Rates are quoted monthly. Always work out the total repayable over the full term before comparing against a conventional mortgage rate.
- Fees are frequently deducted from the advance, so the amount reaching you can be materially less than the facility figure.
- Figures on this page are indicative market ranges at the time of writing. They are not offers, and nothing here is a recommendation for your circumstances.
You might also want
Tell us about the case
The fact find takes a little longer than an enquiry form, and it means an adviser can approach lenders straight away rather than coming back with questions.
