The 6 month mortgage rule explained

Bridging loans can be a lifesaver, but with high interest rates you will want to pay it back asap.

Refinancing within the first six months of ownership can make it more difficult to find a willing long-term lender.

Bridging loans are a vital financial resource for property buyers who need quick, short-term funding.

These loans help secure properties rapidly, especially in competitive markets or for buildings that need renovation. However, the high interest rates linked to bridging finance mean many borrowers aim to switch to a long-term mortgage as soon as possible.

This process can be complicated by the 6 month mortgage rule that many lenders follow.

This article explores the options and challenges of refinancing your bridging loan within 6 months, offering valuable insights for property buyers in this situation.

What Is the 6 Month Mortgage Rule?

The 6-month guideline is a practice followed by many mortgage lenders in the UK.

It stems from recommendations made by the Council of Mortgage Lenders (now part of UK Finance) to combat potential fraud and money laundering. This guideline suggests that lenders should not offer mortgages on properties that have been owned for less than six months.

The origins trace back to the property boom of the 1990s and early 2000s.

During this period, some investors exploited the system by purchasing properties with minimal deposits and quickly remortgaging at inflated values. This practice, known as “back-to-back” transactions, exposed lenders to significant risk, especially when the property market crashed in 2008.

It’s important to note that this is a guideline, not a strict rule or law.

Lenders interpret and apply it differently.

Some adhere to it rigidly, refusing any mortgage applications within the first six months of ownership. Others are more flexible, considering applications on a case-by-case basis.

Some lenders even disregard the guideline entirely, focusing instead on other risk factors.

So if you are looking to transition from a bridge loan over to a long-term mortgage, within 6 months of purchase, your options will be limited. Wherever possible, get confirmation of the deals available before you commit to the initial purchase, at least then you know what your choices are.

Why Refinance a Bridging Loan Early?

There are several reasons why you might want to refinance your bridging loan within the first six months of ownership:

Property improvements

If you’ve used a bridging loan to purchase and renovate a property, you may be ready to refinance once the work is complete. This allows you to benefit from the increased property value and secure a long-term mortgage at a lower interest rate.

Bridge to Let

The basics of ‘bridge to let’ is to purchase with a bridging loan, then after improving the property, remortgage to a buy to let mortgage. This would often happen within the first 6 months.

Shift in property use

Perhaps you’ve decided to convert the property into a buy-to-let investment. In this case, you’ll need to switch to a specialised buy-to-let mortgage.

Capitalising on market conditions

If mortgage rates drop significantly, you might want to secure a good deal as soon as possible.

In all these scenarios, waiting for six months could mean paying thousands of pounds in unnecessary interest. This is why many bridging loan borrowers are keen to refinance as quickly as possible.


Day one remortgage

A day one remortgage is a specialist mortgage product designed for those who need to refinance very soon after purchasing a property.

As the name suggests, these mortgages can theoretically be taken out from the first day of ownership, although it does take the normal amount of time to arrange.

There are mortgages to suit most circumstances; buy to let, holiday let, residential.

A day one mortgage works similarly to a standard mortgage, but with some key differences. Lenders offering remortgages will typically require additional proof of ownership, as your name may not yet appear on the Land Registry. This could include the property’s title deeds or a copy of the purchase contract.

Because of this, it’s best to use the same conveyancing solicitor, and to tell them your intentions when initially buying the property.

Because most lenders adhere to the 6 month rule, there aren’t that many to choose from.

Understanding Bridge-to-Let Solutions

Bridge-to-let products offer another potential solution.

These are hybrid products that combine a short-term bridging loan with a pre-approved buy-to-let mortgage.

You apply to one lender, who provides both parts of the finance.

They’re particularly useful if you’re purchasing a property that isn’t immediately suitable for mortgage lending (perhaps due to renovation needs) but will be once work is complete.

With a bridge-to-let product, you can typically switch to the buy-to-let mortgage as soon as the property meets the lender’s criteria, even if this is within the first six months. This can provide simplicity and peace of mind from the outset, as you know you have a long-term financing solution in place.

Other Options If Early Refinancing Isn’t Possible

If you’re unable to refinance within the initial six months, there are other options to consider:

Extend the bridging loan term

Some bridging lenders may be willing to extend your loan, giving you more time to arrange long-term finance. This normally requires a fee and occasionally a higher interest rate.

Refinance the bridging loan

If the existing lender won’t play ball then you could consider a refinance bridging loan. This is essentially a bridging remortgage with a new lender.

Wait for the 6-month period to pass

While not ideal, sometimes waiting until more lenders are willing to consider your application can result in better terms overall, and more choice.

Don’t forget, you don’t have to wait six months before you can apply for a new mortgage. You have to have owned it for six months before the bridge loan can be replaced.

Lenders with Extended Waiting Periods

While the standard guideline suggests a 6-month waiting period before remortgaging, some lenders take a more cautious approach by extending this timeframe to 12 months.

This longer period reflects a more conservative stance on risk management and property valuation.

Lenders who implement a 12-month rule are often seeking additional assurance of the property’s true market value and the borrower’s financial stability. This extended period allows for a more established track record of the borrower’s ability to manage the property and its associated costs.

It also provides a clearer picture of any changes in the property’s value, especially in fluctuating markets, and reduces the risk of involvement in rapid buy-and-sell schemes or property flipping.

Do the rules only extend to bridging loans?

No, the six month rule is not affected by how you purchased the property in the first instance. It is purely a time-based rule, so it would apply whether you used cash, a bridging loan or a standard mortgage.

The 6-month mortgage rule, while not a legal requirement, has become a significant factor in the UK property market.

Introduced as a guideline by the Council of Mortgage Lenders (now UK Finance) following the 2008 financial crisis, this rule aims to prevent fraud and protect lenders from inflated property valuations.

At its core, the rule suggests that lenders should not offer mortgages on properties owned for less than six months.

However, the interpretation and application of this guideline vary widely among lenders. Some adhere strictly to the 6-month period, others extend it to 12 months, and a few disregard it entirely, focusing instead on other risk factors.

For property investors, developers, and homeowners, this rule can present challenges when seeking to refinance quickly.

However, options do exist for those needing to remortgage within the first six months of ownership. These include specialist day-one remortgage products, bridge-to-let solutions, and lenders who consider applications on a case-by-case basis.

Need some help?

If you need a short-term bridging loan then a specialist broker is a good place to start. You will get expert help and advice along with a wide range of lenders to choose from.

To get matched with a specialist broker, please call us on 0330 030 5050.

Published:
What Checks Do Bridging Loan Companies Carry Out?
Getting a bridging loan might feel like stepping into unfamiliar territory. You might be wondering what checks lenders will make, what documents you’ll need, and whether your application will succeed. ...
How Do Bridging Loans Compare‌ To Mortgages?
The choice between a bridging loan and a mortgage isn’t always straightforward – each has its place in property finance. A bridging loan might help you move quickly on an ...
Cross Charge Bridging Loans Explained
Owning multiple properties opens up interesting borrowing possibilities, yet many property owners don’t realise they can use their combined equity more effectively. If you’ve got equity spread across other properties, ...
What Does Below Market Value Mean?
Spotting a property listed well under its expected price can set your pulse racing. Is it too good to be true? Not always. Below market value (BMV) properties can offer ...