01 / The mechanics
How it works
- A charge is taken over property, and the amount advanced is set against its value.
- The term is short, and the lender underwrites the exit — how the loan gets repaid — as much as the borrower.
- Interest is often retained or rolled up rather than paid monthly, so the debt grows across the term.
- If the exit slips, an extension is negotiated at a cost, or enforcement follows.
02 / The trade-offs
Who it usually suits
A dated exit — a sale, a refinance or a completion — that can be evidenced.
Where the cost sits
Monthly interest, arrangement and exit fees, plus legal and valuation costs paid whether or not the deal completes.
03 / Look closely
What to watch for
What happens if the exit slips, the cost of extending, and what is actually at risk if it does.
Questions worth asking
- What is the cost if the exit is three months late?
- Which property is charged, and is a home involved?
- Are the legal and valuation costs payable if the loan does not complete?
- Is interest retained from the advance, and how does that affect what I receive?
04 / Take a step back
Before you commit
If the exit is not dated and evidenced, this is the wrong instrument — the cost of an overrun usually exceeds the benefit of moving early.