You’ve taken out a bridging loan, perhaps to buy at auction or break a property chain.
Now you’re wondering if you can simply switch it to a regular mortgage to reduce those monthly costs. Here’s what you need to know about moving from bridging finance to a mortgage – and why it’s not quite as straightforward as it might seem.
Property finance can be tricky to understand, especially when dealing with specialist products like bridging loans.
While you can’t directly convert a bridging loan into a mortgage, you absolutely can refinance to a mortgage – it just takes proper planning and understanding of the process.
Understanding Bridging and Mortgages
Bridging loans serve a specific purpose in property finance – they provide quick, short-term funding when mortgages won’t work or aren’t fast enough.
The key difference lies in their structure: bridging loans typically last 3-24 months and don’t require monthly payments, while mortgages run for many years with regular monthly repayments.
Think of bridging loans as a temporary solution (albeit an expensive one) that gives you time to arrange longer-term finance.
The rates might seem high, but they’re designed for short-term use only. That’s why having a clear exit strategy – your plan for paying off the bridging loan – is absolutely essential.
Read more: How Long Can You Have a Bridging Loan For?
The Six Month Rule Explained
Most UK mortgage lenders follow what we call the ‘six month rule‘ – they won’t consider a mortgage application until you’ve owned the property for at least six months. Some even extend this to twelve months.
This will cause problems if you’re looking to refinance a bridge within this time-frame.
It’s not an issue with bridging companies, just for mortgages.
Fortunately, there are some mortgage lenders that aren’t so strict, so remortgaging is still an option within the first six months. A mortgage broker will be able to identify which lenders are the most suitable.
If you’re buying at auction or planning significant renovations, factor this six-month period into your timeline from the start. Many property investors get caught out by not realising this restriction exists.
Read more about the 6 month rule for mortgages.
Get access to expert brokers and specialist bridging lenders
Can you convert a bridging loan to a mortgage?
No. Bridging loans cannot be ‘converted’ in to a mortgage. However, it is possible to use a new mortgage to repay the bridging loan.
Bridging lenders rarely offer long-term mortgages as well, so you will be dealing with two lenders. Rather like remortgaging your house.
Planning Your Exit Strategy
Your exit strategy isn’t just about knowing how you’ll repay the bridging loan – it’s about having a detailed plan with backup options.
Start working on your exit at least three months before your bridging term ends. (In practice, I usually advise clients to start even earlier – it’s amazing how quickly time flies when dealing with property).
Standard mortgage lenders look at applications very differently from bridging lenders. While bridging focuses mainly on the property’s value and your exit strategy, mortgage lenders want to see:
- Your income and employment status
- A strong credit history
- Regular saving patterns
- Property condition and marketability
- Proof of how you’ll afford monthly payments
Read more: What are some common exit strategies for bridging loans?
Getting a Mortgage After Bridging
The process of moving to a mortgage requires careful preparation.
If getting a mortgage was part of your original repayment strategy then you may have already applied for a DIP or received confirmation that a mortgage is possible.
Two of the biggest issues we see here is the time it takes to get a mortgage approved and the property valuation.
Mortgage underwriters aren’t known for their speed of service or efficiency. Allow 3 months for a mortgage application to be assessed and a mortgage offer issued.
While valuations are done shortly after you apply, there can be discrepancies between the value you are expecting, and the figure provided to the lender. You may well need to appeal this valuation, providing additional information to support your figure.
Working with an independent mortgage broker becomes particularly valuable here. They’ll know which lenders are more flexible with applications following bridging finance and can present your case in the best light.
Alternative Options
Sometimes, moving straight to a mortgage isn’t possible within the time available.
That’s where re-bridging comes in – taking out a new bridging loan to repay the existing one.
While this can buy you more time, it can come with higher costs and should be viewed as a last resort rather than a first choice.
Bridging refinance can be arranged quickly and can allow you a further 3-6 months to obtain long-term finance.
Another option could be to ask your lender for an extension. There’s no guarantee that this will be granted and your interest rates will probably go up.
Property sale remains another viable exit strategy, though market conditions can affect this significantly. Always have a backup plan in case your intended exit strategy faces unexpected challenges.
Steps to Successful Refinancing
Start gathering your documentation early.
You’ll need considerably more paperwork for a mortgage application than you did for your bridging loan. This includes:
- Full proof of income and outgoings
- Evidence of any property improvements
- Current property valuation
- Details of your future plans for the property
Check your credit history before you apply for a new mortgage. Some lenders are fussier than others, so it helps to know if there are credit issues still showing.
Most importantly, maintain regular communication with your bridging lender, especially if you encounter any delays or changes to your plans. They’re usually more flexible if kept informed of your progress.
Making It Work
Moving from bridging finance to a mortgage requires planning and often professional support.
While you can’t simply convert one to the other, with proper preparation and the right advice, you can successfully transition to longer-term finance.
Start exploring your options early, understand the restrictions you might face, and consider working with professionals who can guide you through the process. Remember – bridging loans serve a valuable purpose, but they’re never intended as a long-term solution.
For personalised advice about your situation and to explore available mortgage options, contact an independent mortgage broker who can review your circumstances and recommend suitable solutions.
Need some help?
To get matched with a specialist broker, please call us on 0330 030 5050.
Frequently Asked Questions
There’s no set timeframe but most lenders require 6-12 months ownership before considering a remortgage application.
Read more: What is the 6 month mortgage rule?
Yes, but timing is essential. Start preparing at least 3 months before your bridging loan ends. Consider re-bridging if you need more time.
Read more: Can You Pay Off a Bridging Loan with Another Bridge?
Options include re-bridging (taking another bridging loan), selling the property, or negotiating an extension with your current lender.
Read more: Can You Extend a Bridging Loan?
Yes, but you’ll need evidence of works completed and a new valuation. Some lenders may want to see building regulations approval.
Yes, if the property meets rental requirements and you can demonstrate suitable rental income potential.
Read more: Buy to Let Remortgages
Mainstream lenders require the property to be habitable before granting a mortgage. This applies to residential mortgages and buy to let/holiday let.
Consider development finance or another bridging loan until works are complete.
