A first charge is the primary legal claim a mortgage lender has over a property. When you take out a mortgage to buy a home, the lender registers a first charge against the property with the Land Registry. This means that if the property is sold or repossessed, the first charge holder is paid back before any other creditors.
The first charge is the most senior form of security on a property. If you later take out additional borrowing secured against the same property, such as a second charge loan or secured loan, those lenders would hold a subordinate charge and would only be repaid after the first charge lender has been satisfied in full.
The first charge remains in place until the mortgage is fully repaid. At that point, the lender releases the charge and the Land Registry record is updated to reflect that the property is no longer encumbered by that debt.
You buy a home with a £200,000 mortgage from Lender A, who registers a first charge. Two years later, you take out a £30,000 secured loan from Lender B, who registers a second charge. If the property were sold, Lender A would be repaid first.
Key Points
- The primary lender's legal claim on the property
- Registered with the Land Registry
- Gives the lender priority over all other creditors in case of sale or repossession
- Second charge and subsequent lenders rank behind the first charge holder
- Removed when the mortgage is fully repaid