A charge is an interest in the ownership of a property. This is most often a mortgage that allows someone to borrow a significant sum to make ownership possible. It could also relate to another debt secured on the property, however, such as a secured personal loan.
It differs from unsecured loans in that the property acts as collateral in case anything should go wrong. With an unsecured loan, your property wouldn’t be at risk if you fell behind with the repayments. You would still be liable to pay back the loan, of course, but the bank or building society that extended the loan would not have attached it to your home.
With a mortgage, the amount loaned is going to be far larger. This means there is a greater risk to the lender in loaning that sum of money – often in the hundreds of thousands of pounds or more – to the person requiring it. If you want to purchase a property worth £800,000, you are going to require a mortgage to make it happen (unless you are exceptionally fortunate). The lender will evaluate your request, and if they grant it, they will secure that loan against the property you are buying. This is a charge. It is also referred to as a charging order and it links the debt with something of enough value to pay it back should something go wrong.
The charge is also referred to as the first charge. It means the lender is first in line to have their loan repaid if the property is sold, either through the natural buying and selling process or because of debt complications.
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