Compare buy-to-sell mortgage rates: Short-term finance

Buy-to-sell mortgages are short-term bridging loans for property investors who plan to buy and sell homes quickly; discover how they work and if they work for you.

Thinking of getting into property investment but don’t have bags of spare money? Why not follow the lead of thousands of UK property investors last year who “flipped” homes to make a profit.

Property flipping” means buying a house, doing it up and selling it quickly. A buy-to-sell mortgage (also called a bridging loan) is a way of financing that flip.

Compare buy-to-sell mortgages and rates

Table: sorted by monthly interest rate
Name Product Maximum LTV Loan term Loan amount Monthly interest rate
United Trust Bridging Loan
United Trust Bridging Loan
70%
1 month to 36 months
£75,000 to £25,000,000
0.48% to 1.1%
Hope Capital Bridging Loan
Hope Capital Bridging Loan
75%
3 months to 24 months
£50,000 to £500,000
0.54% to 1.05%
Octane Bridging Loan
Octane Bridging Loan
65%
1 month to 24 months
£150,000 to £25,000,000
0.55% to 1%
Lend Invest Bridging Loan
Lend Invest Bridging Loan
75%
3 months to 24 months
£75,000 to £25,000,000
0.55% to 0.94%
MFS Bridging Loan
MFS Bridging Loan
75%
3 months to 18 months
£100,000 to £0
0.65% to 1.25%
Octopus Bridging Loan
Octopus Bridging Loan
60%
1 month to 24 months
£50,000 to £25,000,000
0.7% to 0.9%
loading

Compare up to 4 providers

Overall representative example for regulated bridging loans
If you borrowed £214,000 over a 1-year term at 8.96% p.a. (fixed), you would make 12 monthly payments of £1,628.48 and pay £233,541.76 overall, which includes interest of £15,441.76, a broker fee of £0.00 and a lender fee of £4,100. The overall cost for comparison is 11.5% APRC representative.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

What is a buy-to-sell mortgage?

Can’t pay for your property flip outright? Then you’ll need a mortgage.

A fast-moving property investor needs a mortgage designed to be taken over months not years like the traditional high street type.

That’s where buy-to-sell comes in. The finance can be approved by the lender and paid back by the investor in a much faster timeframe than a traditional mortgage.

How does a buy-to-sell mortgage work?

A buy-to-sell mortgage is a short-term loan known as bridging finance and, because savvy property investors go to auction houses to hunt for bargains, it’s also called auction finance.

You’ll need a sizeable deposit, at least 25% of the property’s value, and you can apply for a loan from £10,000 to well in excess of £10 million.

The buy-to-sell mortgage is secured on the property being purchased and can be taken out from between one and 24 months. The house does not have to be fit to live in when you buy it either.

The finance is repaid from the sale of the house, which the lender calls your exit route or strategy.

Unlike traditional mortgages, which can carry a hefty penalty for repaying the loan within two years, buy-to-sell loans are designed to be paid back quickly.

You can choose to repay the loan in a way that suits your property flip strategy. For example, if you wanted to avoid making a dent in your renovation budget you can ask to add your monthly instalments to your loan balance. Then repay the whole lot from your property flip profits when you sell. This is called rolling up the interest.

How much does a buy-to-sell mortgage cost?

Given the short-term nature of bridging finance, buy-to-sell mortgage rates tend to be higher than traditional mortgages and monthly interest rates are quoted rather than an Annual Percentage Rate (APR).

The interest rate depends on the value of your loan compared to the value of the property. The lower this ratio the better.

For example, if your loan was 50% of the value of the property, you’re likely to be offered a lower interest rate than if your loan was 75% of the property’s value.

Buy-to-sell interest rates can increase if the work needed to be carried out on the house is considered heavy refurbishment.

You may also pay fees to your broker (if using one) and lender for arranging and agreeing the mortgage.

Who would benefit from a buy-to-sell mortgage?

Buy-to-sell mortgages are best suited to investors who plan to sell/flip the property quickly. Last year, around 23,000 homes were sold within 12 months of being bought generating investors an average profit of £40,995, according to estate agent Hamptons International.

To make profit from a property flip, you need to buy a house being sold at a discount or one that will improve in value after renovations.

Auction houses are ideal places to discover a bargain. Around 20,000 homes went under the hammer in 2020, according to the Essential Information Group.

Families who inherit properties from loved ones or lenders who have repossessed homes often sell at auction and cut the price to get a quick sale. Homes that have fallen into disrepair and have failed to sell through an estate agent could also end up on the auctioneer’s books.

How can I get a buy-to-sell mortgage?

High street banks don’t offer buy-to-sell mortgages so you’ll need to find a specialist lender.

Buy-to-sell mortgage products are unregulated when the property will not be lived in by the person who is taking out the loan, or their close family. This means borrowers who take one out are not protected by the Financial Conduct Authority. A bridging loan is regulated when the loan is secured against a property that is currently occupied, or will be occupied in the future, by the borrower or any member of their immediate family (which probably won’t apply to your situation if you’re planning sell the property on quickly, or if you don’t live in the property while you’re renovating it).

To find a list of reputable lenders, visit the Association of Short Term Lenders’ website. To be a member of the trade body, lenders must adhere to a code of conduct that among other rules states they must disclose all costs and fees upfront and fees cannot be excessive.

What is the difference between a buy-to-sell mortgage and a traditional mortgage?

There are various reasons why you should not or could not use a traditional mortgage in a buy-to-sell situation:

  • With a traditional mortgage, you may have to own the property for a minimum time period before being allowed to sell it (which wouldn’t be suitable for property flipping).
  • You would pay big early repayment charges with a traditional mortgage (again, it’s likely you’ll be selling the property on quickly, so that would not be good news).
  • It may take too long to finalise a traditional mortgage (and often you need to move quickly to snap up a bargain property, or only have a short payment window to pay for an auction property).
  • You can’t secure a traditional mortgage against uninhabitable property (for example, if you buy a wreck at auction).

Whereas most traditional mortgages will charge fees for early repayment and make you wait at least six months before selling a property that you’ve just bought, a buy-to-sell mortgage doesn’t have these restrictions.

One of the other big advantages is that this type of finance can be secured for both habitable and uninhabitable property. Uninhabitable conditions can range from parts of the roof or walls being missing, to where there’s no working kitchen, bathroom or heating, which can be the case with some auction properties.

These loans can also be finalised quickly – in a matter of days or weeks – and are usually available with or without an end date, giving property flippers greater flexibility.

And rather than monthly instalments, you’ll likely pay off the loan and any interest in one lump sum – either at the end of the loan term of when you come to sell the property.

Given the short-term nature of the borrowing, the interest rates on offer for buy-to-sell mortgages are likely to be a lot higher than for traditional mortgages. In fact, you may see them advertised at monthly rates, rather than as an APR.

You can also expect to pay higher product fees and have to stump up a larger deposit to buy a property. But if you’re looking to flip a property quickly, a buy-to-sell mortgage is still likely to be the most suitable type of loan.

Example of using a buy-to-sell mortgage

An overall representative example for regulated bridging loans
Based on borrowing£214,000 over 1 year
Interest rate8.96% p.a. (fixed)
Lender fee£4,100
Overall cost of comparison11.5% APRC
Broker fee£0.00
Total amount repayable£233,541.76 inc. interest of £15,441.76

Do banks offer buy-to-sell mortgages or do I need a specialist lender?

Mainstream lenders and big high street banks don’t tend offer buy-to-sell mortgages. They are quite niche products, so it’s likely you’ll have to go to a specialist lender.

It may also be worth approaching a mortgage broker who specialises in this area of property financing, as they may be able to help you access lenders offering these types of products.

How to increase your chances of being approved for a buy-to-sell mortgage

To be eligible for these types of finance deals, you’ll usually need to already have 25% of the property’s value as a deposit. The larger the deposit, the more likely you’ll be approved for a good interest rate.

You can also improve your odds of getting a great buy-to-sell-mortgage deal by having the following:

    1. A strong exit route. You’ll be questioned extensively about your exit route. Typically, this will involve remortgaging or selling the property. If your project involves refurbishment, the lender will usually want to see evidence that your plans are realistic. The more reliable your exit route appears, the easier it will be to get a good mortgage deal approved.
    2. A good property. The easier the property looks to sell, the more comfortable a lender will be with approving your loan. If the property is already inhabitable, that will work in your favour. If there are no hurdles to a smooth sale, such as leaseholds or non-standard construction, that’s a good sign too.
    3. A good credit score. Lenders will use your credit score to assess how reliable you are when it comes to repaying debt. A good score may allow you to access the best rates. If your exit route involves remortgaging, they’ll be particularly keen to check that your credit score will allow this.
    4. Experience in property flipping. If you can demonstrate experience of having successfully used these mortgages to flip properties in the past, the lender may be more comfortable approving your application.
    5. A mortgage adviser. A mortgage adviser with specialist knowledge of this market will be able to point you in the direction of the best interest rates from the lenders most likely to approve your application.

Other finance options for buying and developing property or land

There may be particular scenarios where a buy-to-sell mortgage isn’t exactly what you need to finance your property venture.

In those instances, check out our guides to getting a mortgage or loan to buy a piece land or finance a self-build property.

Are there any other alternatives?

If the property is not in need of refurbishment and you plan to rent it out, a buy-to-let mortgage could be a better option.

Pros and cons of buy-to-sell mortgages

Pros

  • Can be used to buy an uninhabitable property.
  • Investors can sell the property within six months of buying it, a no-go for traditional mortgages.
  • No hefty early repayment fees.

Cons

  • Interest rates can be expensive.
  • Not available through mainstream banks.
  • If the property is unsold by the end of the term, the loan is still repayable.

The bottom line

Buy-to-sell mortgages are a type of short-term finance that are also known as bridging loans. They are designed for people who want to buy a property (often, but not always, at auction) and then sell it on soon afterwards. As buy-to-sell mortgages are short-term loans, interest rates are often expressed on a monthly basis and are usually higher than those associated with a traditional mortgage (which come with terms lasting up to several decades). Make sure you work out all the costs involved and have a strong exit strategy for selling the property, repaying the loan, and hopefully bagging some profit.

According to Bridging Trends, annual gross bridging loan lending fell 40% to £455 million in pandemic-hit 2020. Gareth Lewis, commercial director at MT Finance, which compiles the Bridging Trends data, says: “After the first lockdown, we saw the re-emergence of some larger lenders and if you combine this with the stamp duty changes, it is no surprise that there was a stimulus on rates and regulated bridging in the latter part of the year. As the vaccine rolls out… I believe we will see a new transactional flow from renewed confidence in the economy and businesses re-establishing themselves.”

Frequently asked questions

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you.

More guides on Finder

  • Getting a 5% deposit mortgage under the government’s new guarantee scheme

    Learn more about the new government scheme that allows first-time buyers and home movers to get on the property ladder.

  • Chain break finance

    Learn everything you need to know about chain break finance – a type of bridging loan that stops you losing your dream home if the sale of your existing one falls through.

  • Fix and flip

    Read our in-depth guide to fix and flip and how this type of property investment works, including the factors you need to consider, the risks to be aware of and how to finance it.

  • Commercial bridging loan

    Everything you need to know about commercial bridging loans. We look at when they’re useful, how they work and what to be aware of before taking one out.

  • Hard money loans: Short-term finance in the UK

    Learn everything you need to know about hard money loans – also known as bridging loans. Find out how they work, what they can be used for and their benefits and downsides.

  • 100% bridging loans: How to get one

    Read our in-depth guide to 100% bridging loans, including how bridging loans work, how to borrow 100% of the property’s value, how to get the best deal and the pros and cons.

  • Molo Finance mortgage review

    Discover whether a digital-only Molo Finance mortgage could be suitable for you.

  • Compare bridging loan rates for property development

    Everything you need to know about the benefits of using a bridging loan to fund a property development project if you don’t have the cash already available.

  • Compare bridging loans to buy land

    Find out if a bridging loan could be a good option versus other types of finance if you’re buying land.

  • Compare residential bridging loan rates

    Everything you need to know about residential bridging loans, including what to consider before taking one out, what they can be used for and their pros and cons.

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked
Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.

2 Responses

    Default Gravatar
    JodyMarch 10, 2019

    Ok, so my partner and I are exploring the idea of converting a property into flat. The property’s asking price is 1,000,000. We will go in with a lower offer but my question is what would be needed and how realistic would it be?

      Avatarfinder Customer Care
      JoshuaMarch 12, 2019Staff

      Hi Jody,

      Thanks for getting in touch with Finder. I hope all is well with you. 😃

      Regarding your question, that would depend on your situation and what you and the seller agreed upon. Best is to discuss this with the seller to learn the proper course of action to take.

      I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

      Have a wonderful day!

      Cheers,
      Joshua

Go to site