In This Article
What is a short term mortgage?
When people talk of a short term mortgage, they may talk about a mortgage that allows repayment without a penalty or a bridging loan.
Taking a standard mortgage product that does not have an early redemption penalty allows you to pay back the mortgage at your convenience.
Often, when you take a standard mortgage product fixed for a certain amount of time, for example, two years, there is a penalty on the mortgage for early repayment.
If you were to repay the mortgage within the first or second year, the lender would charge you this early redemption penalty due to the lost interest they have missed out on.
If you bought a property to refurbish and then sell, you might not wish to have this type of mortgage product due to the extra expense when repaying the mortgage.
If you were to take a mortgage product without an early redemption penalty, this would allow you to repay the mortgage once the property has been renovated.
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Bridging loans as a short term mortgage
Another type of short term mortgage is a bridging loan. Bridging loans are arranged for a shorter term and are designed to be paid off within this period.
The average time for a bridging loan is usually around 12 months.
People take bridging loans when the property is not suitable for a standard mortgage or if there is urgency in the transaction and there is no time to wait for a traditional mortgage to go through.
In these events, people may take bridging loans to buy the property and either sell it shortly or refinance it onto a standard term mortgage.
If you are considering taking a bridging loan to purchase a property but plan to refinance it onto a standard mortgage, you should ensure that you fit the criteria for a mortgage in the future.
This is because if you get stuck on a bridging loan and cannot refinance the property, this could be costly to borrow money.
Bridging loans are at higher interest rates than standard mortgages, and usually, the interest is added to the loan.
If you are considering a bridging loan, you should always take professional advice. If you would like I NEED ADVICE to match you with an experienced bridging loan adviser, complete the contact form.
Your bridging loan adviser will likely be a National Association of Commercial Finance Brokers (NACFB).
Can a first time buyer get a short term mortgage?
A first-time buyer can get a short term mortgage.
If taking a standard mortgage, products that have no early redemption penalty can be accessed by first time buyers.
Not every lender offers mortgage products with no early redemption penalty, but some do on a selection of their products.
Usually, penalty-free mortgage products will be variable rate mortgages, such as the lender’s standard variable rate or tracker rates.
However, some lenders offer fixed-term mortgage products with no early redemption penalty. This gives the first time buyer certainty over the interest rate with the flexibility of repaying the mortgage early.
Bridging loans are also available to first time buyers when they meet the lender’s criteria.
For example, a first time buyer with a large enough deposit could qualify for a bridging loan because they plan to sell or refinance the property later.
If doing this, it would be strongly recommended for the first time buyer to take expert advice making sure that the bridging loan is correct for them and that they would qualify for a standard remortgage in the future.
Can you get a short term mortgage on a buy to let property?
Getting a short term mortgage on a buy to let property is possible.
If taking a standard buy to let mortgage, some lenders offer buy to let mortgage products with no early redemption charge.
This would allow the buy to let investor to buy the property with a plan to keep it for the long term but give them flexibility should they need to sell the property in the short term.
If the property was not fit for mortgage purposes, or there was significant urgency in the transaction, it would also be possible to get a bridging loan against the buy to let property assuming the rest of the situation meets the bridging lender’s criteria.
The bridging lender would want to know your intention for the property, and if you are keeping it, be reassured that you would qualify for a buy to let mortgage to repay the bridging loan in the future.
Professional advice would be strongly recommended in a situation like this.
Can you get a short term mortgage on a commercial property?
It is possible to get a short term mortgage on commercial property by way of a bridging loan.
For a standard term commercial mortgage, lenders will not be willing to offer a flexible product allowing quick repayment.
Most commercial mortgage lenders charge early redemption penalties on commercial mortgages.
Products can change regularly, so for confirmation, it would be best to talk to a commercial mortgage adviser.
It is possible to get bridging loans on commercial mortgages if you are looking for a short term mortgage.
A commercial bridging loan would allow you to buy the commercial property when you do not have time to wait for a standard mortgage or cannot get one at the current time.
Commercial lenders can offer bridging loans on various commercial properties such as warehouses, offices, hotels, shops, pubs, etc.
It may be possible to buy the commercial property with a bridging loan and then refinance it later on to a standard commercial mortgage.
If you were thinking of doing this, you should talk to an experienced commercial bridging loan mortgage adviser that could speak to you through the options.
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Are there more fees on a shorter term loan?
There are not always more fees on short-term standard mortgages with no early redemption charge.
However, this will depend on the lender and the product. Products change regularly, so an independent mortgage adviser would be able to talk to you about the different products and costs.
If you were to take a bridging loan, there are usually more fees than a standard mortgage.
Fees related to bridging loans consist of valuation fees, arrangement fees, broker fees, legal fees and redemption fees.
Fees will differ across different bridging loans, so it is best to talk to an experienced bridging loan adviser who can explain the fees.
Would I get a short term mortgage if I have bad credit?
Getting a short term mortgage is possible if you have bad credit.
Some lenders will offer standard mortgages with no early redemption penalty even if you have bad credit.
However, it will depend on the bad credit and whether it matches the lender’s criteria.
Bad credit can come in many forms, such as bankruptcies, county court judgements, arrears, defaults, individual voluntary arrangements, payday loans, and more.
Lenders specialising in people with adverse credit allow people in the situation to take mortgages.
Some bridging loan lenders can lend to people with adverse credit.
You must tell your mortgage or bridging loan adviser the full details of your adverse credit, so they know the best route for you.
You can go to Check My File and sign up for a free trial to learn more about your credit history.
Do you need a specialist mortgage broker for a short term mortgage?
If you take a standard short-term mortgage with no early redemption penalty, you will not necessarily need a specialist mortgage broker.
Independent mortgage advisers can access products with no early redemption penalties for you to qualify for if you meet the lender’s criteria. However, it is always worth making sure that your mortgage adviser has experience relevant to your transaction.
This is a specialist mortgage product if you want a bridging loan.
You should ensure that your bridging loan adviser is qualified and experienced in arranging many bridging loans.
You can ask your adviser their history and whether they have experience in arranging transactions similar to yours.
Conclusion
It is possible to get a short term mortgage allowing you to sell or refinance the property without incurring an early redemption penalty.
If you plan to refurbish a property and then sell it, this is a way of removing a future fee from your profit margin.
Bridging finance is also a short term mortgage designed to be repaid in the future by selling or refinancing. Bridging finance is a specialist subject, so professional advice is paramount.
Please complete the contact form if you would like. I NEED ADVICE to match you with a mortgage or bridging loan adviser who can tell you your options.
They are experienced, which can boost your chances of being approved.
