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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: October 20, 2021

How do you arrange a mortgage on a property you’ve just bought outright with cash savings? Why would someone want to sell a house they’ve only recently purchased themselves? Well, there’s actually a host of legitimate scenarios where this can happen, and you can read all about them in this guide to back-to-back mortgages.

What is a back to back purchase?

Any property sale made within six months of the seller originally buying it is classed as a back-to-back purchase. The title deeds of a property must be re-registered with the U.K Land Registry following each change of ownership, so it’s quite easy for a mortgage lender to check when the previous sale was completed (and they will).

Buying a property and then selling it within six months, or buying a property with cash and then applying for a remortgage, whilst not uncommon, isn’t something a lender expects to see on a regular basis. As such, they will ask for further clarification as to how and why this request for funding is now being made.

What is a sub-sale transaction?

A sub-sale transaction is basically another term for a back-to-back purchase. There’s lots of different situations where this type of sale may occur. Some are perfectly feasible but some can be frowned upon by mortgage lenders.

For example, if someone has recently inherited a property they have no use for they can place it on the market for sale. If you then want to buy that property within six months of them taking ownership most mortgage lenders would find this perfectly acceptable.

On the other hand, any sub-sale transaction which involves an intermediate seller looking to make a commercial profit from a swift sale would normally see a buyer’s application declined by most, if not all, mortgage lenders.

If you want to understand more about why the 6 month rule is now in place when buying a property, keep reading the next section, which looks at all the different scenarios in more detail and how, with the help of a mortgage broker, you can successfully apply for a mortgage in these circumstances.

What is the 6-month rule with mortgages?

The 6-month rule basically recommends that any U.K lender does not approve a mortgage or remortgage application on a property within 6 months of when it was originally purchased.

It is called the 6-month rule but, in reality, it is not a rule or point of law but more of a guideline that many lenders follow. But, likewise, some lenders will ignore the rule in certain circumstances.

This guideline was introduced by the Council of Mortgage Lenders (CML) following the market downturn of 2008. Up until this point, it was quite common for savvy property developers and selling agents to work together, profiting on quick sales whilst passing higher borrowing risks onto buyers and, ultimately, the lenders when repossessions spiked.

Despite this chequered history, there are now a number of lenders who will lend within 6 months in the event of certain circumstances arising, namely:

Inheritance: If you inherit a property and want to release some of the equity or buy a property from someone who recently inherited it, most lenders will consider such applications.

Original cash purchase: Where a property is bought initially using cash savings but a remortgage is required within six months. A classic example would be someone who buys a property via an auction and then needs funds for renovations.

Bridging loans: If there’s been a delay to the sale of an existing property and, as a result, a bridging loan has been used to complete the transaction. Most lenders will consider this a feasible reason for back-to-back lending.

Repossessions: Mortgage lenders who acquire repossessed properties can sell them on to prospective buyers who can then apply for lending to complete the purchase.

Porting: When discounted or fixed rates are switched across to your new property and the deal expires within six months, you can apply for a remortgage with a different provider.

Part exchange: Most lenders will look at applications on properties where the current owner has taken it on as a part exchange and now wishes to sell.

Buying a property that falls into the category of a back-to-back purchase isn’t quite as straightforward as buying one on standard terms. This is where the guidance of an experienced mortgage broker becomes quite crucial.

Back to back mortgage lenders

Most U.K lenders (including high street ones) are happy to consider ‘Day 1’ remortgage applications on a case-by-case basis. ‘Day 1’ doesn’t necessarily mean you have to apply the day after you take ownership, it simply means they’ll look at an application at any point, despite the six-month rule, and depending on the circumstances.

Some lenders prefer that the applicant already resides in the property and an application may be subject to a maximum LTV, based on the lesser of the original purchase price of the property or the current valuation. In all cases, though, a lender will want to understand why the lending is now required so soon after purchasing the property.

The mortgage broker we introduce you to will already have an understanding of this process and what the lenders are looking for, so don’t worry. As long as your situation matches one of the scenarios outlined in the section above you should be fine.

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Get matched with a back to back mortgage broker

Back-to-back mortgages are a fairly niche area of lending but as long as your circumstances fit into one outlined in this article there’s lots of lenders who will be willing to consider your application. Having the right advisor, one who has experience of this type of lending, can make all the difference.

This is where we can help. Using our advisor-matching service we’ll be able to identify an advisor who understands how back-to-back mortgages work and which lenders to use. Call 0808 189 2301 or make an enquiry and we can arrange a free, no-obligation call with a mortgage broker who specialises in this area today.

FAQs

Can I get a back-to-back mortgage if a family member has lent me money to buy a house?

This situation would still fall under the category of ‘original cash purchase’ so there will be lenders definitely willing to take a look at the application. When you speak with your broker, be sure and outline to them the exact details of how you originally bought the property and they can guide you through the process.

Do I have to stay on a variable rate for six months if I move house and port my discount rate mortgage?

No, not at all. This would fall into the ‘porting’ category which means you can apply for a remortgage with a new provider if you wish. The mortgage broker we introduce you to will be able to talk you through all the current deals available so you can choose one that suits you.

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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 OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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