Pete Mugleston | Mortgage AdvisorPete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.
Updated: 23rd October 2019 *
When you think about mortgages, the first thing that often comes to mind is having a loan that’s going to take around 25 years to pay back.
But if the idea of being tied to paying off a mortgage over such a long period doesn’t appeal to you then a short term mortgage loan could be the solution.
As with all types of mortgages, there are both benefits and limitations to short term mortgages which is why we’ve created a comprehensive guide to what you should know about short term mortgages in the UK.
In the UK the length of a mortgage varies between providers. Though typically a mortgage lasts for around 25 years, you can get longer mortgages over 40 years.
At the other end of the scale, short term mortgages can be for as little as six months to two or five years. Lenders have their own minimum terms which vary from no minimum to a 15-year minimum.
The mortgage term cannot be less than the term of the product.
Why do people take out short term mortgages?
There are a number of reasons why someone may want to take out a mortgage that’s short term. Here are the main ones:
Age - If you’re older, possibly retired or soon to be retiring, traditional lenders may not offer you a mortgage as you’ll no longer be receiving a regular income. If that’s your situation, a short term mortgage allows you to buy a property as the lender will think it’s less risky to only lend money for two years.
Delay on selling a current property - A short term mortgage can give you the freedom to buy a new home whilst you’re waiting for your current property to sell. This would become a short term second mortgage.
Own quickly - The more you pay each month, the quicker the loan is paid off and the quicker you’ll be the owner of the property. Also, the amount of interest paid is less over a shorter term, so the cost of borrowing is less. So if you’re keen to own quickly (and don’t have the capital to buy a property outright) short term mortgages can be a good alternative.
Can I get a short term mortgage loan?
Anyone who meets the criteria set out by the lender can apply for a short term mortgage.
The key thing lenders want to know is that you can afford to pay back the loan but they will also factor in your age, current earnings and credit history before they make you an offer.
What types of short term mortgage are there?
Just like the different types of long term mortgage that are available, short term mortgages are offered with different terms. As the amount borrowed is paid back over a shorter term, the monthly payments will be considerably higher.
With a short term interest-only mortgage, the borrower is only required to pay off the interest each month. The full loan amount is not due until the end of the term.
This can be a solution if you’re keen to get on the property ladder and have finances invested elsewhere. This could serve as capital to pay off the mortgage debt at the end of the term. It’s wise to take advice from an expert to ensure that your repayment vehicle will provide the necessary funds when you need them.
Call 0808 189 2301 or make an enquiry and we’ll match you with one of the experts we work with.
Short term fixed-rate mortgage
With fixed-rate mortgages, the interest rate you pay tends to last for two, five or ten years, so for a short term mortgage, you should be able to get a fixed rate depending on your overall circumstances.
Short term tracker mortgage
Again, you can get a tracker mortgage - which come with interest rates that are usually in line with the Bank of England’s base rate - that last for two, five or ten years but it’s best to discuss whether this is the right type of mortgage for you with a broker.
Short term offset mortgage
Offset mortgages are products that are tied to the borrower’s savings account. The interest payable is usually less, as it is calculated based on the mortgage balance minus the amount held in the linked account.
They are typically quicker to pay off than traditional mortgages so already tend to be shorter in term. It’s possible to take out a specifically ‘short term’ offset mortgage but as it’s a specialism you’ll get the best access to deals from a whole-of-market broker, like the ones we work with.
Call 0808 189 2301 or make an enquiry. The experts we work with have access to all the mortgage lenders in the UK. They’ll be happy to answer your questions and find the right mortgage for your needs. The service we offer is free, there’s no obligation and we won’t leave a mark on your credit rating.
What are the benefits of a short term mortgage?
There are a number of benefits that make short term mortgages a good idea:
Rates - One of the common concerns about mortgages is that interest rates may change. If you have a fixed rate mortgage you can’t benefit from any potential lower rates. However, if you’re only tied to a contract for two years, which is the typical length of a short term mortgage, you don’t have to worry about this.
Flexibility - Self-employed and small business owners often prefer a short term mortgage if they can afford one at the current time and are concerned that their income in the future may decrease. Knowing you can pay off a mortgage in a couple of years can make home-owning much easier.
There may be additional benefits, depending on your situation. For example, if you’re paying lower interest rates, you might be able to make more savings but on the other hand as you’re paying off more of your loan each month it may not be the case.
The best way to know what the personal benefits are for you is to speak to an expert mortgage broker who will look at your situation and can advise the best approach for you.
Call 0808 189 2301 for a free, no obligation chat or make an enquiry and we’ll match you with an expert broker for free.
Short term mortgage vs long term
Short term mortgages tend to work out cheaper than long term mortgages. And, although your repayments will tend to be far higher, you won’t be saddled with mortgage payments for very long because you’ll pay the debt off quicker.
The downsides of a short term mortgage is that you’re more likely to feel the impact if the interest rate rises during the term of your loan.
While long term mortgages work out to be more expensive in the long run, the monthly payments will be cheaper than you would have to pay on a short term mortgage. Over the entire term of a mortgage, with the right kind of mortgage deal, you should be less affected by rate changes.
The fundamental downside of a long term mortgage is that you’ll be saddled with the debt for a far longer duration than you would if you were able to get a short term mortgage.
How can I get the best short term mortgage rates?
There are a number of things to consider to get the best short term mortgage, the first is that not everyone will receive the same offers from the same lender.
Every application will be assessed on criteria. Typically speaking if you meet the criteria (age requirements, have a reliable salary and good credit history) you will find there are more lenders willing to offer you a home loan.
If you don’t meet the criteria there will still lenders who can assist but your choices will be more limited. For example, if you have bad credit, the list of lenders may be limited but, depending on the specifics of your credit problems, it may still be possible to get the mortgage you want.
Secondly, you should seek help from a broker – this is exactly what they are there to do: find you the best deals for you budget, circumstances and property preferences. We can help you find one, give us a call on 0808 189 2301 and we’ll connect you with one of the professional whole-of-market brokers that we work with.
Here are some of the most common types of query customers ask us about short term mortgages:
Can I get a short term holiday let mortgage?
Holiday lets are where you purchase a property that you let out for holidaymakers, this may just be seasonal and not all year round.
With that in mind, lenders are most concerned with how much income the property will generate and whether you can, therefore, afford to pay off your loan.
Holiday lets are considered to be risky as the income isn’t guaranteed but there are specialist lenders who are happy to lend for holiday lets and the experts we work with can help save you time, money and hassle by taking you to the lender with the criteria requirements to suit your circumstances.
The interest rates on short term mortgages can sometimes be lower than those on long term ones. The rate you might find may be based available deals, but will also depend on your affordability.
To find out the best rates you could get on a short term mortgage, call 0808 189 2301 or make an enquiry.
All the experts we work with are whole-of-market mortgage brokers with access to all the mortgage lenders in the UK. They have the tools, knowledge and accessibility to ensure you get the absolute best possible rates on a mortgage.
Can I get a short term commercial mortgage?
The most common commercial mortgages tend to last anywhere between 3 and 25 years. Anything less than three years would likely be considered a commercial bridging loan.
To find a short term mortgage to suit your needs with the best possible rate, talk to one of the whole-of-market mortgage brokers we work with. Call 0808 189 2301.
Are short term self build mortgages available?
Self-build mortgages are a special type of mortgage with arrangements that differ from traditional mortgages aimed at customers who are planning to build their own home. Most self-build mortgages are offered on a short-term basis, as the borrower would usually refinance the funds onto a traditional residential mortgage when the building work has been completed.
Again, it’s considered a riskier type of mortgage but an experienced broker should be able to find a provider who can help you.
Can I get a short term mortgage for commercial property development?
Usually, if you require a short term mortgage for renovation there are bridging loans or development finance deals available over short-term periods.
Are there short term mortgages for pensioners?
Most lenders prefer to offer mortgages to you if you’re working to ensure they’re paid off before you head into retirement.
So when it comes to applying for short term mortgages for over 50s, lenders tend to favour, and may only offer short term deal if you’re a pensioner and are no longer working.
That way they can feel confident that you’ll be alive to pay it off. You shouldn’t, therefore, have a problem applying for a short term mortgage as a pensioner as long as you can prove you can afford to pay it back.
Can you remortgage a short term mortgage?
Technically speaking you should be able to remortgage any type of mortgage however it’s not often the case that someone remortgages a short term mortgage.
If you require another loan (which is a key reason for remortgaging) it will probably work out cheaper to take out a different type of loan than to pay all the fees associated with remortgaging.
Is it possible to get a short term buy-to-let mortgage?
It used to be the case that lenders weren’t that keen on short term but to let mortgages, mostly because it was too risky. If, for example, a property was empty without tenants for any period of time then there may be problems with the repayments.
However, in more recent times and largely as a result of the growing demand for short-let properties (such as Airbnb), there are now some lenders that will accept short term buy-to-let mortgages.
A whole-of market broker like the ones that we work with will be able to advise you further. Make an enquiry or call 0808 189 2301 for a free, no-obligation chat with one of the experts we work with.
What is a short term bridge loan mortgage?
This is a phrase that might be used when a customer is using a bridging loan as a stop-gap solution to buy a house, with the intention of refinancing the debt onto a residential mortgage at the end of the term.
*Based on our research, the content contained in this article is accurate as of 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 info 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.
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 here...