Buy-To-Sell Mortgages

If you’re looking for finance to flip a property then read more here about buy-to-sell mortgages - short-term mortgage finance for developers.

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Home Buy To Let Mortgages Buy-To-Sell Mortgages
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Nathan Porter

Reviewer: Nathan Porter

Independent Mortgage Advisor

Updated: March 15, 2024

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

March 15, 2024

In this article, we’ll look at how buy-to-sell mortgages work for investors looking for a quick turnaround, how to get one and why using a broker can help you secure the best deals.

What is a buy-to-sell mortgage?

A buy-to-sell mortgage is a short-term home loan specifically for anyone wanting to buy, renovate and sell a property for profit, sometimes known as ‘flipping’. A buy-to-sell mortgage is essentially a bridging loan – a particular form of finance that can be arranged much more quickly than a traditional mortgage and with a typical term of 1-3 years.

Interest on a bridging loan is normally more expensive than on a long-term mortgage and is calculated monthly rather than annually. At the end of the term, when you sell the property, the loan is repaid in full.

Bridging Loan Calculator

You can use our bridging loan calculator to calculate your LTV (Loan-to-Value) ratio and get an estimate of your monthly finance costs as well as the total interest you will pay.

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Number of months you're taking the loan over
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This is the monthly interest rate
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Loan amount must be less than property value

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Now that you have a clearer idea of how much your loan will cost, you should speak to a bridging finance broker to explore all of your options and boost your chances of getting the best deal possible.

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Why would you need to use one? 

There are a few reasons why you would need a bridging loan when flipping properties. Firstly it’s a matter of timing – bridging loans can take days to organise rather than months, making them particularly useful for quick purchases such as buying at auctions.

A buy-to-sell mortgage also gives you the flexibility you need to repay the loan after a very short amount of time. A traditional residential or buy-to-let mortgage will often include early repayment charges whereas a buy-to-sell mortgage is specifically for investors looking to sell and repay the loan after only a few months or years.

The condition of the property can also be a factor as standard mortgages can only be used to buy habitable homes, either for you or for tenants. Often if you are renovating homes for resale, you may be buying them when they’re not yet in a fit state to live in, including not being secure or not having working kitchens and bathrooms. A bridging loan can be used for a property that isn’t habitable, so gives you a lot more scope in terms of what you can buy.

How to get a buy-to-sell mortgage

First things first, get in touch with us and we’ll match you with a specialist broker. A buy-to-sell mortgage application can be complex, but your broker will be on hand to guide you through each step.

Map out your exit strategy

Your business plan and exit strategy are going to be key in terms of convincing lenders that you’re able to pay back the loan. Renovation schedules, costs and projected profit are all important and any previous experience you have as a property developer can also help lenders to feel confident in your plans.

Secure your deposit

This could be the profits of a previous property renovation or if you have a portfolio of properties so may be releasing equity. You’ll likely need a minimum 25% deposit, so it’s key that you’ve factored this in, as well as legal fees and mortgage arrangement fees.

Identify the right lender

Lenders offering buy-to-sell mortgages are not usually present on the high street and not easy to find without expert help, so your broker will be invaluable here. They’ll be able to identify the right lenders, plus negotiate rates and terms on your behalf.

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Costs involved with buy-to-sell mortgage transactions

Budgeting for a renovation with a buy-to-sell mortgage isn’t as simple as taking the cost of the mortgage and adding on the renovations, there are a lot of other costs involved that will soon add up. These include:

  • Mortgage arrangement fees – these are typically 1-2% of the loan amount, so £1,000 – £2,000 for example on a £100,000 mortgage. Some lenders also charge an admin fee for setting up the loan of around £500.
  • Exit fees – some lenders charge an additional exit fee when you pay off the loan. This could be 1-2%, so check in with your broker about whether or not you’re liable for this.
  • Mortgage broker fees – these will vary depending on the broker and the complexity of your mortgage. Many of the brokers we work with take their fees from the lender on completion and those that charge an upfront fee will refund this if they fail to secure you a mortgage.
  • Valuation fee – this could be anywhere from £100 to £1,500 depending on the condition of the property. Some lenders may offer to waive valuation fees as an incentive.
  • Legal fees – You’ll need a solicitor to process the purchase. This should cost you between about £800 and £1,500.
  • Contingency fund – renovations notoriously run over budget so make sure to have an emergency fund for unexpected costs along the way. You never know what you might discover once you start knocking down walls.

Which lenders offer buy to sell mortgages?

While it may be possible to get bridging finance through one of the main high street banks, this kind of finance is more commonly offered through specialist lenders and it will be these specialists lenders that are likely to be the first port of call for your broker.

Lenders currently offering buy-to-sell mortgages include:

  • Precise Mortgages
  • Octopus Property
  • Together

Rates and terms will vary between lenders, but to give you an idea of what’s on offer currently, take a look at our rates table below.

Lender Product Details
Frosted Rates Image

Looking for more rates and deals?

We can match you with a mortgage broker who can provide you with up-to-date bespoke rates and deals from across the entire market.

Last updated May 2024

Please note that the above rates were accurate at the time of writing but are always subject to change at the provider’s discretion. Speaking to a mortgage broker is the best way to find the most up-to-date deals.

What are the eligibility criteria?

As with any kind of mortgage, your lender will have key eligibility criteria that they will use to decide whether or not to say yes to your mortgage application. There are some variations though between a buy-to-sell mortgage and a standard residential or buy-to-let mortgage.

Deposit

LTV is normally capped at a lower maximum than for a residential mortgage, but roughly in line with buy-to-let deposits at around 75% on average. It’s possible to get 80% or sometimes even higher with some lenders depending on your other circumstances. It’s very unlikely that you’ll find a 100% LTV bridging loan but your broker may be able to help if this is what you need and have other assets you can use as security.

Exit Strategy

Whereas a standard mortgage would be dependent on your income from employment or projected rental income, bridging finance places less importance on this and instead considers your exit strategy – how you intend to pay back the loan at the end of the term. In the case of flipping a property for resale, your exit strategy will be the sale once renovations are complete.

Credit History

While this may have some bearing, it’s less important than with other types of borrowing as the capital will be repaid from the property sale. It will be less relevant to lenders therefore if you have missed or late payments in the past as long as they are confident about your ability to sell the property and have enough money to pay back the loan.

Loan Term

Most buy-to-sell mortgages are for terms of up to a year, with some as long as 24 or 36 months. Being realistic about how long the flip is going to take is crucial here – renovation projects often overrun and you don’t want to come to the end of your buy-to-sell mortgage term and not have been able to sell and repay the loan.

Are there any alternative options?

There isn’t a one size fits all solution when it comes to buy-to-sell mortgages and you may find, depending on your circumstances, that there is an alternative that’s a better fit for you.

Buy-to-let mortgage: If you’re in two minds about your longer-term plans and want either to rent the house or even live in it yourself while you refurbish it, you could use a buy-to-sell arrangement before remortgaging on to a buy-to-let or residential mortgage once all the renovations have been completed.

Cash purchase: An obvious option, if you have the luxury, is to simply buy your investment property in cash. This way you’ll incur no interest or product fees, you’ll simply pay for the property upfront and then pocket any profits at the end.

Release equity: If you have an existing property portfolio and plenty of equity, another option is to take out a secured loan or a remortgage against one of your other properties.

How Online Mortgage Advisor can help you find the right broker

As you can see, getting the best deal on a buy-to-sell mortgage isn’t simply a case of popping into your local bank – getting a mortgage for flipping is actually a lot more specialist and is best done with the support of a broker who has specific experience in buy-to-sell mortgages and bridging finance.

Give us a call now on 0808 189 2301 or fill out our short online enquiry form and we will assess your individual circumstances and set up a no-obligation chat with a broker who has the best skills match for you. Our broker matching service is completely free and all of the advisors we work with have been pre-vetted by us, so you’ll know you’re getting advice and support you can trust.

Maximise your chance of approval with a specialist in buy-to-sell mortgages

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FAQs

Yes, having bad credit doesn’t have to mean you can’t get a buy-to-sell mortgage, but it may make it harder to find a lender or mean you have to pay slightly higher rates. However, unlike traditional long-term mortgages, credit history can be less important with short-term bridging finance as repayment depends on a robust exit strategy rather than the ability to maintain monthly repayments.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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