Buy To Sell Mortgages
If you’re looking to venture into property selling as a form of income or as a new career path, then you need to be aware of the mortgage options available under the buy to sell (also known as bridging loan) umbrella, as standard mortgages do not apply to those wishing to sell a property quickly.
Standard mortgages don’t work when you want to buy and sell a house quickly because lenders usually have early redemption fees and won’t allow you to sell within six months, therefore, seeking specialist advice is vital if you are buying to sell within a 12 month period.
When you are looking to buy to sell, you are essentially looking for short-term finance and you will more often than not want to flip the property around quickly (within 0-12 months), once it has been renovated, so you can repay your loan as soon as possible.
Things to consider
Buy to sell mortgages will usually require a minimum of 20-25% deposit, as well as added interest fees on top of that. Buy to sell mortgages are more of a risk to lenders because the property in question is often inhabitable and will undergo refurbishment. This is seen as a risk because there is always a chance that the house doesn’t sell, which would be a problem if the seller has large renovation bills to pay off. Therefore, the lender covers their back by charging more interest each month.
In contrast to a standard mortgage, buy to sell or bridging loans have fewer restrictions on them because they are designed for those who want to flip the house quickly. Factors such as early repayment fees do not apply and there is no restriction on waiting 6 months for when you sell because they are loans specifically tailored for a quick turn around.
|Amount to finance|
|Amount of interest|
If you are looking for a buy to sell mortgage but you have bad credit, then you may have difficulty being approved because you will be too high of a risk for a lender.
You may now be struggling to decide which mortgage option is best for your situation, do you need a buy to sell mortgage (bridging loan), a residential mortgage or a buy to let?
As mentioned previously, the buy to sell option is best suited to those who want to flip a house that is in need of renovation over a short period of time and who have cash readily available to cover the higher deposits and interest fees. Those who seek a buy to sell may have seen a house at auction and don’t have time to undergo the process of getting a standard mortgage. Buy to sell mortgages can be initiated quickly and are usually repaid on the sale of the newly renovated property.
A residential mortgage is still an option to be considered when you are looking to buy property quickly, it just has different requirements. As you can gather from the name, residential mortgages require you to live in the property once you’ve completed and it also needs to be deemed habitable. If you are not looking to sell the property on quickly, then a residential mortgage is better suited than a bridging loan. They have lower interest rates but if you did want to pay off the loan quicker than you anticipated, then you will be met with early repayment charges.
If you want to buy a house in a habitable state quickly, but you don’t want to live in it yourself then buy to let (BTL) mortgages may be the option for you, buy to let is similar to residential mortgage, the only main difference is that you won’t be living in the property.