Secured Lending

Types of secured lending

Broadly, there are four main types of secured loans in the property world. First charge mortgages, commonly known as the “main” mortgage on a property, are the primary loan secured on the asset. What this means in practice is that in the event of repossession, the first charge mortgage lender is paid off before any other parties involved^[6].

Following on from this are second charge mortgages. These are funds that are secured on a property where a first charge mortgage is already in place. These loans are commonly used for home improvements, debt consolidation, or other major expenses.

Then there are bridging loans. This type of specialist finance covers a broad gamut, from straightforward purchases through to capital raises for business investments. Typically, bridging loans are used for short-term concerns such as chain breaks and auction bids.

Equity release is another type of secured lending. Here, older homeowners release cash from their homes without having to move. Most commonly, this is done via a “lifetime mortgage”, which allows people to borrow money against the value of their homes by taking out a loan secured on them. The released capital can be put towards home improvements, gifted deposits, or whatever else the borrower plans to spend it on.

How do secured loans work in the UK?

Just as is the case with other types of loans, those who utilise secured loan products will make monthly repayments to pay back what is owed, plus any interest. With specialist secured lending, covering the facility is more focused around exit strategies, which typically involve selling an asset to cover the loan in full, or refinancing down the line with long-term lenders.

Specialist secured loans are generally unregulated, meaning they are more flexible than their high street counterparts, and can be delivered with more speed. Residential mortgages are regulated by the Financial Conduct Authority (FCA) whose objectives are to protect consumers, protect financial markets, and promote competition^[10].

On this market specifically, the FCA has announced plans to review mortgage rules, and look for ways to modernise the industry, make it more accessible for consumers, and maintain responsible lending practices^[11].

Benefits of Secured Lending

Secured lending brings with it several benefits for property investors. For starters, it allows for higher borrowing capacities when compared to unsecured lending options. Unsecured loans present more risk to lenders and as such, they’re generally smaller. Whereas with secured loans such as mortgages, there is less risk so lenders can offer much more in capital.

It may also be easier to get a secured loan with a spotty financial history over an unsecured loan. While lenders will have different preferences and risk tolerances, the added element of a secured asset may even out the risk that comes with borrowers who have missed payments or CCJs on their records.

Also, secured loans may have broader eligibility for those with relatively unique backgrounds. Examples include the self-employed, and those with complex income sources.

Then there are the terms. Generally, secured loan interest rates are lower than their unsecured counterparts. Again, this reflects the reduced risk associated with them from a lender’s perspective. Furthermore, with secured loans, borrowers typically have longer periods to cover that interest, and repay the loan.

Unsecured loans are spread over longer periods of time, making the monthly repayments more affordable. Making regular repayments over a long period can also boost one’s credit score.

Secured loans may also come with flexible repayment options that can help with affordability. At Market Financial Solutions for example, we can utilise rolled-up interest, deferred interest, and top-slicing across our product range.

What Can a Secured Loan Be Used For?

Secured loans can be used for all manner of property investments, the most obvious being purchases. A secured loan can be used to purchase various residential, BTL, commercial, and/or mixed-use properties. This can range from basic flats through to shopping centres. These purchases can also come via auction bids, repossession sales, and other niche methods.

They can also be used for property development projects. While we do not offer ground-up development finance at Market Financial Solutions, we can provide development exit loans for those who are coming to the end of a project and who need more breathing space.

Moreover, our secured loans can be used for various refurbishment, conversion, or renovation plans. It’s also there for refinancing strategies.

In our market, specialist secured loan applications are being driven by developers and investors[20]. Specifically, bridging loans are being used by many borrowers for refurbishment plans to meet looming EPC requirements. Also, auction bidders are turning to bridging loans to secure opportunities quickly.

On opportunities, borrowers also continue to use bridging loans to avoid losing properties when a chain breaks. A bridging loan can keep an investment afloat while options are found for the long-term. Considering that as many as 60% of homeowners have been involved in a property chain when purchasing a home[21], chain breaks are likely to continue to be a key concern for bridging lenders and brokers.

While many brokers and borrowers may only think of property investments when it comes to secured loans, they can be used for other purposes. So long as the loan is secured against a property (or another asset a lender accepts) it can be used for many business-related end goals. This can include debt consolidations, business expansions, cashflow management, and more.

What unites all these options in the specialist market is the exit strategy. Regardless of what the loan will be used for, the exit strategy needs to be clear, and evidenced from the outset. At Market Financial Solutions, we will not issue funding without a confirmed exit strategy. Common examples include the sale of an asset, long-term refinancing, or other evidenced options.

Borrowing Power & Loan-to-Value (LTV)

How much a person can borrow will depend on a combination of their circumstances and those of the lender. From a lender’s perspective, they’ll want to limit their secured lending concentration risk as much as possible[28].

Concentration risk occurs where a lender approves a secured loan on too many properties in the same area or development. On a narrower scale, concentration risk can also involve how much money is lent to an individual borrower.

Should a lender’s loan portfolio be concentrated in one area (say secured residential loans in a singular town) and that area suffers a downturn, it could lead to substantial losses. As such, lenders may limit how much exposure they have to a specific market.

Specialist lenders, usually also need to adhere to their funding line mandates. Specialist lenders often rely on wholesale or institutional funding lines. These lines allow larger institutions to access a niche market they don’t serve directly.

But, they often come with limitations. Some institutions may only want their capital invested in the commercial property market, or they may impose maximums for singular loans. This in turn can limit how a specialist lender delivers funding for property investors.

The size of secured lending facilities can also have an effect. Larger loans can tie up liquidity for a lender. This may limit their ability to fund other deals, at least in the short-term.

On the borrower’s side, their borrowing capabilities will primarily be driven by loan-to-value (LTV) ratios. The LTV ratio compares the amount of money borrowed against the property value. It’s presented as a percentage and the higher the percentage, the greater risk there is for lenders.

More risk translates to higher costs and tougher terms, and most lenders will place limits on how high LTVs can be. At Market Financial Solutions, most of our products go up to 75% LTV.

Boosting Affordability with ICR Tools

While LTV is the primary driver of secured lending, there are auxiliary tools that can help with repayment affordability. This revolves around the interest coverage ratio (ICR) which is used for BTL investments specifically.

It gauges whether a borrower can meet their debt obligations, and it’s also expressed as a percentage. While it is used for landlords investing in the BTL market, it can also be used by companies when they’re utilising secured business loans.

For landlords, the ICR lays out the portion of the gross rental income required to cover loan repayments, taxes, and other costs. This calculation allows lenders to determine if borrowers can afford the repayments on their secured lending facility.

The specific ICR formula is as follows: ICR = EBIT (earnings before interest and taxes) / interest expense. The result is then multiplied by 100 to get a percentage. Most lenders will set ICRs of between 125% and 145% for their secured loans[29].

At Market Financial Solutions, our secured lending borrowers can boost their loan size with various repayment tools at their disposal, so long as the resulting ICR is 125% or higher. This includes rolling up the interest, meaning borrowers pay nothing at the start for one to nine months, and any accrued interest during that time is paid at the loan’s redemption. This helps borrowers progress with their plans, while allowing us to boost the ICR as we compare the remaining months of interest against 24 months of rent.

Deferred interest is another option that allows our borrowers to deduct up to 2% from their rate, and any interest accrued during the term is paid at redemption. This cuts monthly interest payments, and boost the ICR as we compare the cut payment to the rent.

Also, there’s top slicing. We can allow BTL borrowers to utilise their surplus salary, savings, additional rent revenues from other properties, or other forms of liquid funds to “boost” their rental income. Of course, the underwriters involved will work closely with our brokers and borrowers to determine if any of these options are right for their circumstances.

To help with this, we have secured lending calculators on our site that can allow users to see how these ICR boosting tools could work with their circumstances. From here, our underwriters can be contacted directly to discuss next steps.

The Application & Underwriting Process

Secured lending application processes will vary between lenders. However, most will follow a similar pattern. To start with, every lender will need to be contacted with an enquiry, or application. These days, this will be done online, or over the phone.

With this enquiry, the broker (or borrower if they’re applying directly) will need to break down the amount of finance they’re after, what it’ll be put towards, and other key details. Lenders need certain documents to get the ball rolling, such as ID documents, proof of employment/income, bank statements etc.

From here, the underwriting process can begin. To start with, lenders will usually kick off with credit checks once they have verified the borrowers’ details. This will then be followed by a valuation of the security property, to ensure it’s suitable for the loan at hand. Once all the figures are collated, LTV calculations are made and should everything be accepted, a loan offer is produced.

This offer breaks down all the terms and conditions. If they’re accepted the agreement is signed, and the lender registers their charge against the security. Throughout, legal teams will ensure everything goes through the books properly, and the funding is delivered for drawdown.

This is a simplified version of the process but at Market Financial Solutions, we follow a very similar structure. With our bridging loans and buy-to-let mortgages, we can receive an enquiry online, via email, over the phone, or through our live chat.

We respond to all enquiries within four hours, and indicative terms are provided from the get-go, allowing for full transparency from the start. These terms outline an agreed rate, and loan value.

Every one of our deals will have an assigned underwriter from day one, who will work to get a decision in principle issued as soon as possible. This will involve a more in-depth analysis of the borrower and their circumstances, including “know your client” searches. Some examples of the documents we’ll require for this can include proof of residency, three months’ worth of bank statements, and a property portfolio schedule.

Once the underwriter gathers what they need, valuers will be instructed to visit the security property. This will allow us to confirm the details in the DIP. Following this, the lawyers involved will do all the necessary work from their end to help both us and the borrower progress the case. This may include gathering all the relevant information on charges, deeds, priority notices, and more.

Finally, we deliver the funding for drawdown, with the whole process being wrapped up in just a few days where everything lines up. Throughout all this, the underwriter will keep the broker and borrower in the loop with open communication lines.

Timelines for all this will also vary. However, a regulated mortgage application to an offer typically takes between two to four weeks[30]. Also, while we can have funding delivered in mere days, many of our cases are resolved in a few weeks. Generally, the more complicated the circumstance, the longer it takes for capital to be released.

Lender Perspective: How Decisions are Made

Secured lending practices are largely governed by risk modelling. In the simplest terms, lenders use credit risk modelling to assess the likelihood that they’ll be repaid. It helps quantify the likelihood of a borrower defaulting on a loan, and estimates potential financial losses.

In the specialist lending market, there are four key decision drivers behind this modelling. We factor in the security asset, the borrower’s circumstances, the exit strategy, and the underlying numbers (income, portfolio size etc.).

In the broader secured lending market, banks and investment firms must also adhere to capital adequacy requirements[31]. These rules stipulate that financial institutions should have, and be seen to have, a certain amount of capital relative to the amount of business which they undertake and the commercial risk associated with that business. Banks and investment firms that are regulated by the FCA and Prudential Regulation Authority (PRA) must have specific ratios of capital in comparison to the amount of their assets.

Lenders will also be swayed by the default recovery process. While defaulting on a loan is largely a borrower concern, the process can still raise challenges for the lender itself. All the parties involved will want to avoid it.

Where defaults occur, lenders will need to enter a recovery and enforcement process[32]. This process must be carefully managed to ensure compliance with the terms of the loans they issued, and the law.

Lenders must ensure they follow the correct procedures so as to avoid any costly legal challenges, act fairly and reasonably by doing such things as providing adequate notices, and mitigate losses. On the latter, they can appoint a receiver to manage the underlying property or attempt to sell it at the best possible price.

From a commercial perspective, some lenders may prefer to only operate in liquid markets that can lead to easier decision making. Many may only choose to work in London where there are predictable levels of demand. Others may opt to solely lend on residential properties which pose less risk. Regardless, all secured loan lenders should make it clear from the beginning what they’re willing to lend on, and what their terms are.

Secured Lending Costs Beyond Interest

With secured lending loans, borrowers will rightfully be concerned with the interest rates involved. But, they must not lose sight of the other costs that are associated with property loans, and mortgages specifically.

There are the primary mortgage fees which need to be taken into account. This includes an arrangement fee, booking fee, valuation fee, and various legal costs. According to the HomeOwners Alliance[33], these kinds of fees can range from £25, to several thousands of pounds.

Brokers also have their own commissions and fees. Some will expect upfront payments from their customers before they begin their search for deals. These fees can range anywhere between £300 to £600[34]. Also, most mortgage lenders will pay brokers a commission of about 0.35% of the loan size[35].

While this doesn’t primarily concern the underlying borrower, it can still affect them. Brokers may have a preference to work with lenders who pay higher commissions. Also, some lenders may factor their commissions (often called procuration fees) into their product’s rates.

Exit fees, and early repayment charges also need to be kept an eye on. A borrower may incur an exit fee when they reach the end of their secured lending product’s original term, or remortgage with a different lender[36].

Meanwhile, an early repayment charge may be levied where a borrower pays off their loan before the current deal ends, or makes an overpayment that takes them over an agreed overpayment allowance.

An exit fee can range between £75 and £300, whereas an early repayment charge can be up to 5% of the loan amount[37]. All told, Zoopla details it is “sensible” to keep around 15% of the value of a property aside for any additional buying costs[38].

In October 2025, the average UK house price is £270,000, according to the ONS[39]. This means a typical buyer may want to dedicate around £40,000 to cover any applicable costs.

Secured Lending Case Scenarios

Secured property loans, and secured business loans can keep many investment plans afloat when things turn sideways. This is true even of the most standard investments.

Chain Breaks

Take a residential purchase. A property investor plans to purchase a £750,000 BTL property in a prime commuter location. Their mortgage is already arranged with a high street lender, and an offer is in place. However, the seller is in a chain, and a shift in circumstance arises where it becomes clear they need to complete quickly, or risk the chain collapsing. Our borrower is aware of the issue, yet their long-term mortgage lender cannot complete until the chain is re-established and all standard checks are redone, a process that could take several weeks

Thankfully, a secured bridging loan could help here. Rather than lose the property, the investor could turn to us for a bespoke loan to complete the purchase immediately. Our facility could be arranged in a matter of days, allowing the buyer to secure the property while the rest of the chain recovers, or until their long-term BTL mortgage is ready to complete. To help manage cash flow during the short-term period, the investor could roll up interest payments and settle them when they exit the bridge. Once the new mortgage completes, they could refinance seamlessly, repaying our facility in full. With this approach, the investor avoids missing out on a valuable opportunity.

Niche-Investments

Secured lending is also there for commercial investors who may be held back by industry-specific challenges. For a pertinent example, we’re seeing rising demand for owner-occupied care homes[40], but these can be hard to accommodate.

This kind of commercial investment and setup would require a lot of due diligence. From a lending perspective, we’d have to make sure everything lined up perfectly before we could progress. Much of this would depend on the exit strategy and even if the underlying borrower had many available, we’d still have to move forward with caution.

Many borrowers investing in this space have faced a tough few years. A typical investor is unlikely to have particularly good accounts, most likely due to Covid-19 related difficulties. As such, we’d likely need evidenced back up exit strategies, while we could also lend against the bricks and mortar value of the property. If we were to also take into account the trading value, the LTV on this kind of deal could be quite low, which would make us more comfortable in delivering the tailored funding required.

With this kind of specific commercial investment, we’d look out for unique exit options. These kinds of sites can include multiple plots of unused land. If the borrower plans to work with developers to sell or utilise this land, that would make a great exit strategy for our secured property loan.

Development Exit

Another tricky scenario that tailored secured lending can help with is a development exit. Many of the challenges of a development occur towards the end of a project[41]. Thankfully, we can provide a bit of breathing space when these late-stage issues arise.

In recent years, we’ve seen many developments delayed by a lack of power capacity in the National Grid[42]. Developers, through no fault of their own, are hit by surprise costs as they suddenly need to source portable generators, or temporary connections. Added expense is the last thing they need when budgets are spread thin as is.

In finding solutions for this power dilemma, it may leave a borrower completing on a 12-month development plan in month 11. This doesn’t leave much time left over for selling new units. Fortunately, one of our secured development exit bridging loans could provide them with another 12 months of breathing space to effectively market and sell the properties, and avoid selling at a loss in order to meet a looming deadline.

FAQs

Are secured loans cheaper?

Ultimately, the answer to this question is: it depends. The costs involved will almost entirely depend on the borrower’s circumstances. Broadly though, the average interest rate on secured loans can vary between 2% and 10%, while with unsecured loans the rates may be between 6% and 25%[43]. Also, with secured lending, repayments are typically spread out over longer periods, which makes them more affordable.

Do secured loans affect credit score?

Yes, applications for secured lending loans are most likely to affect a borrower’s credit score, even if only temporarily.

Can I repay early?

Borrowers will be able to repay most forms of secured lending early, but this is likely to trigger early repayment charges, and/or exit fees. Borrowers need to ensure any decision made is right for their circumstances.

What happens in default?

When a person defaults on a secured lending loan, the lender(s) involved have the legal right to take possession of the security properties. Although, borrowers may be able to negotiate an agreement with their lenders by contacting them as soon as they realise they’re struggling to meet their payments[44]. Defaults will usually be recorded on a credit report, which will make it harder to access capital in the future.

Is secured lending only for property investments?

No, on top of real estate secured lending, there is secured business lending that can be put towards a range of business plans. Secured lending can also help with debt consolidation, or perhaps even large purchases such as a boat or car.

Can foreign nationals get secured loans in the UK?

Generally, yes. Although lenders will have their own preferences on who they lend to. Foreign national borrowers present additional risk for lenders, and so they may have tougher criteria for them, or they may not serve them at all. At Market Financial Solutions, almost all our loans can be utilised by foreign nationals from any country, other than those that are sanctioned or blacklisted.

Are secured loans regulated?

It depends on the loan one is applying for. A residential mortgage will be regulated, whereas an investment bridging loan will likely be unregulated. At Market Financial Solutions, all our products are unregulated.

How do lenders treat offshore companies?

Offshore companies present higher risks for lenders. As such, they’re likely to impose enhanced due diligence (EDD) on them. This involves more rigorous risk assessments, and will likely lead to higher costs and tougher terms. Some lenders may not be willing to lend to offshore companies, and so brokers and borrowers will need to ensure they find the right lender for their circumstances.

The Future of Secured Lending in the UK

Secured lending, and the specialist market specifically, is set to grow over the coming years. The bridging market has maintained strong momentum throughout 2025, and lenders continue to break records. The latest data from the Bridging & Development Lenders Association[45] showed new bridging loan completions totalled £2.8 billion in Q1 2025, matching the record set in Q4 2024.

At the same time, new applications surged to £18.34 billion, a 55.3% increase on the previous quarter. Loan books have also “swelled” to just under £13bn.

Looking ahead, it seems that AI and other technologies will be at the forefront of change over the coming months. As secured lenders look for better ways to service their clients, AI and intelligent automation investment may help streamline processes, and speed up the process[46].

Secured lenders will need to do everything they can to optimise their services given that they’re under increased regulatory scrutiny. The FCA recently launched the next phase of its Mortgage Rule Review, publishing a discussion paper aimed at encouraging open dialogue on the future of the UK’s mortgage market[47]. This paper aims to help the FCA assess the changes needed to support sustainable home ownership and wider growth.

Having said that, other updates from the regulatory environment indicate that certain rules may be loosened to relieve the “excessive burdens” levied on financial service providers. Nikhil Rathi, chief executive of the FCA, revealed he was planning to change consumer duty rules introduced two years ago, following complaints from companies who said they were too heavy-handed[48]. Both lenders and their clients will need to keep an eye on how the regulatory environment evolves this year and beyond.

Secured lenders are also likely to be swayed by the market’s movements over the coming months and years with many new regulations waiting to be introduced. All this will impact how landlords and property investors proceed, and lenders will be forced to adapt.

Conclusion

Secured lending plays a foundational role in unlocking economic opportunity, and driving growth. It allows individuals and business to utilise their assets as collateral to access funding. This transforms somewhat illiquid assets into working capital that goes towards further investments, expansion, innovation and ultimately, drives economic growth.

Without secured lending, there would simply be no way for many people to own their homes, or reap the rewards of property investment. The ramifications of this results in job creation, regional developments, and even the support of family structures.

We understand just how important the secured lending scene is for our country’s prosperity, which is why we do everything we can to position ourselves as a market leading bespoke lender.

Since our founding in 2006, we have strived to deliver flexible finance rapidly for residential and commercial property investors. We understand that no two deals are ever the same, which is why we don’t have a tick-box lending criteria, and all our deals are underwritten from day one.

What’s more, we are there for property investors who may struggle to attain secured lending loans on the high street. We are happy to hear from those who may have missed payments in their backgrounds, who are investing via a unique setup, or who may be purchasing from overseas.

We are ready to handle any queries that come our way. Our phone lines are open, and our live chat is manned by a human – not a chatbot. Contact us today, if you have any enquiries or questions.

Secured Lending Glossary

• Affordability test: a lender’s assessment of whether a borrower will be able to repay a loan
• Asset backed loan: a secured loan whereby the security is more likely to be a non-property asset. Examples include vehicles, company equipment, or artwork
• CCJ: a county court judgement is a court order made against someone when they have failed to pay a debt. Having a CCJ on one’s record can make it difficult to attain finance in the future
• Deferred interest: where interest payments are postponed for a set period, usually under the condition that the entire balance is paid at the end of a term
• ERC: early repayment charges are penalties levied by lenders when a borrower repays all, or part of a loan before an agreed-upon deal period ends
• Exit strategy: the plan a borrower puts in place to repay their secured loan. Exit strategies primarily concern bridging loans, buy-to-let mortgages and other bespoke products
• FCA: the Financial Conduct Authority is the independent body that regulates financial services firms
• First charge mortgage: the primary loan secured against a property
• LTV: the loan-to-value ratio is a percentage figure that compares a secured property loan’s size against the asset involved
• Rolled up interest: where unpaid interest is added to a principal loan balance, instead of being paid in regular monthly instalments
• Second charge mortgage: a loan secured on a property where a first charge mortgage is already in place
• Secured loan: a loan which is secured against an asset. Usually this is a property but can also include artwork or business machinery
• SVR: a standard variable rate is the interest rate charged when an initial loan deal comes to an end
• Term: the length of time that a borrower has to repay their mortgage/secured loan
• Unsecured loan: commonly known as personal loans; these are products that aren’t backed by any security