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Short term mortgages: Discover if they are the right option
A short term mortgage will cost you less in the long run, but the monthly repayments are higher.
Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
A short term mortgage is a great idea – if you can afford it. You’ll pay a lot less interest and will be able to become mortgage-free quicker. The main disadvantage is that the monthly repayments will be a lot higher.
Realistically, you’ll only be able to afford the repayments on a short term mortgage with a small loan-to-value ratio. Many of those opting for short term deals will have either saved a huge deposit or are selling a home they’ve built a lot of equity in.
How to find the best short term mortgage deal
Most mortgage lenders have a minimum term (usually between three and five years) and a minimum borrowing amount on their traditional mortgage products. If these terms aren’t suitable, explore lenders that specialise in short term deals.
As with any mortgage product, the lender’s biggest priority is that you can comfortably afford the monthly repayments. You may want to use a professional mortgage advisor to find the most suitable deal for your needs. These individuals have specialist knowledge of the mortgage market and will be able to point you towards the most affordable deals that suit your circumstances.
Alternatives to short term mortgages
If you can’t find a suitable short term mortgage, consider these alternatives:
- Personal loans. It’s possible to secure a personal loan against a property. However, the maximum amount on these products tends to be too small to finance most property purchases.
- Bridging loans. Bridging loans are quicker to organise than mortgages and can be secured against uninhabitable properties, but they have huge interest rates. They are typically used to finance purchases that buyers are looking to sell quickly at a profit. This process is called “flipping”.
- Buy-to-sell mortgages. This is a product for those looking to “flip” properties.
Summary: What are the pros and cons of short term mortgages?
Pros
- Cheaper than a long term mortgage.
- Lower interest rates than a bridging loan.
Cons
- Bigger monthly repayments than a long term mortgage.
- There are more terms to meet than for a bridging loan.
Finder survey: Is it better to get on the property ladder when you can, or wait until you've got a larger deposit?
| Response | |
|---|---|
| Both equally | 32.85% |
| Wait until you can put down a bigger deposit | 23.84% |
| Not sure | 21.9% |
| Get on the property ladder (with a lower deposit) | 21.41% |
Source: Finder survey by Censuswide of Brits, December 2023
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. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
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