Yes you can pay off a bridging loan with a mortgage – it’s one of the most common and popular exit strategies used by property investors and developers.
This refinancing option allows you to move from short term to long term funding and get a better interest rate in the process.
Here’s what you need to know.
Understanding Bridging Loan Exit Strategies
You need to give the lender a clear exit strategy for any bridging loan application.
Mortgage refinancing is the preferred choice for professional investors and developers because it’s a structured long term solution that most lenders accept.
Your exit strategy needs to be solid and planned.
Property sales or other capital sources may work in some cases but mortgage refinancing has its advantages. You get to keep the property and move to more manageable monthly payments over a longer term.
UK lenders want to see solid proof your strategy will work before they approve the initial bridging loan. This often means getting a mortgage in principle or demonstrating you meet standard mortgage lending criteria.
Using a Mortgage to repay your bridging loan
The refinancing process usually starts 2-3 months before your bridging loan ends.
This allows time for the remortgage application process and minimises interest payments on your bridging loan.
Your mortgage broker will research the market to find lenders and products suitable for your situation. This will take into account the property type, your income structure, the loan amount required and your long term plans for the property.
The refinancing process involves several stages: property valuation, mortgage application and underwriting, legal work and searches, followed by completion and funds transfer.
Throughout this process you’ll need to provide full documentation including income evidence, bank statements, bridging loan details, property information and standard ID verification.
Get access to expert brokers and specialist bridging lenders
Types of Mortgages
Your chosen mortgage product will depend on the use of the property.
Residential mortgages are for properties you’ll occupy, buy-to-let mortgages for rental properties, commercial mortgages for business premises and semi-commercial for mixed use properties.
Some specialist lenders offer products specifically for bridging to long term finance for experienced borrowers.
Lender Requirements
Mortgage lenders will require a professional valuation to confirm the property’s worth and condition and that these support the loan amount you’re requesting.
The property must meet mortgageable standards – if you’ve used the bridging loan for renovations these must be completed.
Mortgage lenders will only lend against properties that are habitable on completion.
For investment properties lenders will want rental income to exceed mortgage payments by a comfortable margin, often 125% or more depending on your tax position and the lender’s requirements.
Your personal profile plays a bigger part in mortgage approval. Lenders will look at regular income from employment or self-employment and any other income streams. They want to see clear evidence you can maintain monthly payments over the long term.
Credit history counts more in mortgage applications than with bridging loans. Perfect credit isn’t always required but stronger credit profiles get better rates and terms. Self employed applicants will need to show 2 years of accounts but some specialist lenders may consider shorter trading history.
Related reading: Guide to Applying for a mortgage
Your Exit Strategy
Timing is everything.
Starting your mortgage application well before your bridging loan ends gives you time to deal with any unexpected issues. Regular communication with your bridging lender and mortgage broker will keep everything on track.
If issues arise, talking to your bridging lender about extension options early on will be far more productive than asking at the last minute.
Read more: Successful strategies for repaying a bridging loan
Costs
Understanding the full cost picture will help you avoid surprises. Beyond the interest rate, consider arrangement fees, valuation costs, legal fees and potential early repayment charges on your bridging loan.
Monthly payments need to be considered too. Mortgage rates are usually lower than bridging rates but the regular payment structure requires financial planning.
Related reading: A Guide to Mortgage Fees
Refinancing within 6 months
You may find it more difficult to obtain long-term finance where this is within six months of buying the property.
Some lenders adhere to the ‘six month mortgage rule‘ where they require you to own the property for six (or twelve) months before granting a new mortgage.
Fortunately not all lenders have this policy and a day one mortgage can be used to refinance a property shortly after buying it.
Complex Cases and Solutions
Many refinancing scenarios are complex.
Properties won’t always meet standard mortgage criteria. Income structures can be complicated especially for self employed or those with international income streams.
Working with experienced brokers is particularly useful in these situations. They can find specialist lenders that will consider complex cases and help structure the application to address any concerns upfront.
Next Steps
When you’re ready to refinance your bridging loan start by reviewing your current terms and exit date. Get your property valued and gather your financial documents.
Talking to a specialist broker early on will help you identify potential issues and solutions before they impact your refinancing timeline.
Our broker partners regularly deal with complex refinancing scenarios, helping clients move from bridging loans to long term mortgages.
Get in touch to discuss your options and get the best mortgage for you.
Frequently Asked Questions
You can use residential, buy-to-let, commercial, or specialist mortgages depending on your property type and intended use. Private banks can provide bespoke solutions for high-value properties.
Related reading: A Guide to Remortgaging
Properties must be habitable and watertight and meet lender standards. Minor cosmetic work usually isn’t an issue, but major renovations should be completed before mortgage application.
Options include requesting a bridging loan extension, seeking alternative mortgage lenders, another bridging loan, or considering other exit strategies. Early communication with your bridging lender is essential.
Yes, mortgage lenders require their own valuation, even if you had one for the bridging loan. This ensures current market value and confirms the property meets lending criteria.
Read more: A Guide To Property Surveys
Specialist lenders and private banks understand complex income structures. They can consider bonuses, international income, investment returns, and various wealth components.
Related reading: Is a remortgage based on your income?
Yes, if the property value and your circumstances support it. Some clients use this opportunity to release additional equity.
