If you’ve recently bought a property or you’re planning to use bridging finance for a quick purchase, you may have heard about the “6-month rule” that affects remortgaging.
It’s something that can catch many property investors off guard, especially when using bridging loans with short terms.
While this rule can complicate matters for bridging loan borrowers, it’s not an insurmountable obstacle. With proper planning and understanding of how lenders implement, you can structure your property investments to work within these constraints.
Let’s look at what this rule means for bridging loan users, how it affects your exit options, and what strategies you can use to keep your property investments on track.
What is the 6-Month Mortgage Rule?
The “6-month mortgage rule” isn’t actually a law or regulation but rather an industry guideline originally issued by the Council of Mortgage Lenders (now part of UK Finance).
In simple terms, it means most mainstream mortgage lenders won’t offer a mortgage on a residential property that has been owned for less than six months.
This guideline emerged following the 2008 financial crisis as a response to risky lending practices. Before the crash, some investors would buy properties below market value and quickly remortgage them at a higher valuation, sometimes within days of purchase.
This practice, called “back-to-back” transactions, allowed investors to pull out their entire investment plus a profit, leaving lenders with all the risk if property values fell.
The rule applies to most types of mortgage lending, including:
- Residential mortgages
- Buy-to-let mortgages
- Remortgages
- Further advances
It’s worth noting that while we refer to it as a “rule,” different lenders can interpret and apply this guidance in their own way. Some follow it strictly, others have exceptions, and a small number might not apply it at all in certain circumstances.
The key point is that if you own a property for less than six months, your options for refinancing with a standard mortgage will be limited.
This creates particular challenges for bridging loan borrowers, who often plan to refinance as their exit strategy.
How the 6-Month Rule Affects Bridging Loan Exit Strategies
Bridging loans are designed as short-term finance solutions, with terms between 3-18 months.
Most borrowers who use bridging finance plan to exit through either:
- Selling the property
- Refinancing to a longer-term mortgage
The 6-month rule directly impacts that second option.
If your bridging loan term is shorter than six months, you might find yourself unable to refinance with a conventional mortgage lender when the loan term ends.
This mismatch between bridging loan terms and the 6-month rule can create a real headache. For instance, if you take out a 3-month bridging loan to purchase and renovate a property, you might complete the work ahead of schedule but still be unable to refinance until you’ve owned the property for six months.
This could mean paying for an extension on your bridging loan, which comes with additional costs given the higher interest rates on bridging finance.
For property developers and investors who rely on quick turnaround times, this rule can affect profitability. The longer you hold a bridging loan, the more interest you pay, eating into your potential returns.
The rule also affects those who buy at auction, in these scenarios, bridging loans are a popular choice for quick access to funds, but buyers need to be aware that their exit options will be restricted until the six-month ownership period has passed.
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Calculating the 6-Month Period
Understanding exactly when the 6-month period starts and ends is essential for planning purposes. Lenders work from the date you legally became the registered owner of the property, not from when you first agreed to buy it or paid a deposit.
In most cases, the clock starts ticking from the date your ownership is registered with HM Land Registry.
Unfortunately, this can be several weeks after the actual completion date due to processing times.
This means in practice, you might need to wait longer than six calendar months from your purchase completion before being able to refinance.
For example, if you complete a property purchase on January 1st, but the Land Registry doesn’t process the registration until February 1st, lenders will count your six months from February 1st.
You can prove your ownership period by providing:
- HM Land Registry title documents showing the registration date
- Solicitor’s completion statement
- Proof of the original purchase price and terms
Some lenders might ask for additional documentation to verify when you acquired the property, especially if there are any unusual circumstances around the purchase.
TOP TIP!
Using the same conveyancing solicitor for each transaction can help to speed the refinance process up.
It’s quite common for delays to occur because Land Registry hasn’t updated their records. To help, your solicitor can provide evidence of the initial transaction.
Let’s talk bridging loans!
Which Lenders Follow the 6-Month Rule?
Not all lenders apply this rule in exactly the same way, which creates both challenges and opportunities for borrowers.
Mainstream high street banks and building societies tend to follow the rule most strictly.
These lenders often have automated systems that will automatically decline applications where the property has been owned for less than six months.
Specialist lenders, including those focusing on buy-to-let, semi-commercial mortgages, or complex cases, tend to be more flexible. Some have specific policies that allow for exceptions in certain circumstances, while maintaining the rule as a general principle.
A small number of niche lenders don’t apply the rule at all, having developed their own risk assessment criteria. These lenders often manual underwrite each case, looking at the individual merits rather than applying blanket rules.
It’s also worth knowing that some conservative lenders even extend this period to 12 months in certain situations, particularly for very large loans or unusual properties.
This longer restriction isn’t common but might apply in higher-risk scenarios.
The variation in how lenders apply this guidance is why seeking specialist advice can be so valuable – a broker with whole-of-market access will know which lenders might consider your application despite the 6-month rule.
Common Misconceptions
There are several misunderstandings about the 6-month rule that can lead to confusion:
First, the rule doesn’t legally restrict you from selling a property within six months of buying it.
You’re free to sell whenever you want, but the rule means potential buyers might struggle to get a mortgage on your property if you’ve owned it for less than six months.
Second, cash buyers aren’t affected by the rule. If you’re buying with cash or selling to someone who doesn’t need a mortgage, the 6-month rule doesn’t apply. This is why property developers often work with cash investors for quick deals.
Third, the rule isn’t applied identically to all property types. Commercial properties, for example, aren’t affected as the rule only applies to residential property.
Finally, many people believe it’s impossible to get any mortgage within the six-month window. While options are limited, there are a number of lenders willing to offer a mortgage.
Exceptions to the 6-Month Rule
While the 6-month rule is widely observed, there are certain situations where lenders might make exceptions:
Inherited properties often qualify for special consideration. If you’ve inherited a property rather than purchased it, some lenders will waive the 6-month ownership requirement, recognising that this isn’t a speculative purchase.
Properties that have undergone significant improvement can sometimes bypass the rule. If you’ve carried out major renovations that have substantially increased the property’s value, some lenders will consider refinancing before six months – but you’ll need to document all works and costs.
Certain buy-to-let scenarios might qualify for early refinancing, particularly if you’ve converted a property to create additional units or changed its use class (for example, from commercial to residential).
Auction purchases sometimes receive more flexible treatment from specific lenders who understand the auction market. These lenders know that auction buyers often need to use short-term finance initially and may have special products designed for this situation.
To support an exception request, you’ll need:
- Clear documentation of the circumstances
- Evidence of any improvements made
- A valuation showing the current market value
- A logical explanation of why early refinancing makes sense
While exceptions are possible, they’re never guaranteed. Each lender assesses these requests individually, and what works with one lender might be rejected by another.
Alternative Financing Strategies
If you can’t wait for the six-month period to pass, several alternative financing approaches might help:
Bridge-to-let products combine a bridging loan with a pre-agreed exit onto a buy-to-let mortgage. These specialist products are designed with the 6-month rule in mind, with lenders committing upfront to provide the exit mortgage once the property meets their criteria.
Extended bridging terms offer another solution. If your original bridging loan was for three months, for example, you might extend it to cover the full six months, knowing you can then refinance with a wider range of lenders. This costs more in interest but provides you with more time.
Private finance from individual lenders, family offices, or alternative finance providers often comes with fewer restrictions than institutional lending. These sources might consider early refinancing requests that mainstream lenders would decline.
Capital raising from another property. If you own other properties then these could be used as collateral to borrow enough money to redeem the bridge loan.
Each of these alternatives comes with different costs and benefits. While they might solve the immediate problem of the 6-month rule, they may involve higher costs or more complex arrangements than standard mortgage finance.
Planning Your Property Investment Strategy
When using bridging finance as part of your property investment strategy, building the 6-month rule into your planning from the start can help avoid problems later.
Start by being realistic about timeframes.
If you’re buying a residential property with a bridging loan, assume you’ll need to hold the property for at least six months before a standard remortgage is possible.
This means your bridging term should either cover this period or you should have a clear plan for extending if necessary.
Use a broker to obtain an agreement in principle from a lender who will grant a loan within 6 months of purchase.
Factor potential delays into your financial calculations. Renovation works often take longer than expected, and property sales can be unpredictable. Build contingency into your timelines and budgets to account for the possibility of holding the bridging loan longer.
Keep meticulous records of all property improvements.
If you’re adding value through renovations, document everything with receipts, contracts, planning permissions, building regulations approvals, and before/after photos. This evidence can support an early refinancing application or help justify a higher valuation when you do remortgage.
Consider using a solicitor for both transactions, who understands the implications of the 6-month rule. They can help ensure your property registration happens as quickly as possible, potentially reducing any gap between completion and the start of the six-month clock.
Finally, maintain good communication with your bridging lender. If it becomes clear you’ll need to extend the term to align with the 6-month rule, discussing this early can lead to better terms than a last-minute extension request.
How a Specialist Broker Can Help
Working with a specialist finance broker who understands both bridging finance and the broader mortgage market can be invaluable when dealing with the 6-month rule.
Remember that the rule is a guideline, not a legal restriction, and different lenders interpret it in different ways.
A good broker will know which lenders might be flexible about the rule in specific circumstances. They can save you time by approaching only those lenders likely to consider your case, rather than facing multiple rejections from mainstream providers.
Brokers with experience in this area can help structure your finance to work around the rule. This might involve arranging a bridge-to-let product from the outset, setting up a bridging loan with an extension option, or planning a staggered refinance strategy.
Many specialist brokers also have exclusive relationships with lenders who don’t advertise directly to the public.
These lenders often take a more flexible approach to cases that fall outside standard criteria, potentially offering solutions not available on the open market.
FAQ
The 6-month mortgage rule is an industry guideline that recommends lenders not provide a mortgage on a residential property that has been owned for less than six months. It was introduced by the Council of Mortgage Lenders (now UK Finance) following the 2008 financial crisis to prevent property speculation and potential mortgage fraud.
No, it’s not a legal requirement or regulation. It’s an industry guideline that most lenders choose to follow. This means there’s some flexibility in how it’s applied, with certain lenders willing to make exceptions in specific circumstances.
Yes, the rule generally applies to buy-to-let mortgages as well as residential mortgages. However, some specialist buy-to-let lenders might be more flexible with the rule, especially for experienced landlords or certain types of property investment.
Yes, you can legally sell your property at any time. The 6-month rule doesn’t prevent you from selling; it potentially limits who can buy from you. Buyers relying on mortgage finance might struggle to get a loan approved if you’ve owned the property for less than six months.
No, cash buyers aren’t affected by the 6-month rule as it only applies to mortgage lending. This is why property investors sometimes target cash buyers for properties they’ve held for less than six months.
Yes, specialist brokers with whole-of-market access know which lenders might be flexible with the 6-month rule in different circumstances. They can save you time by approaching only those lenders likely to consider your case, rather than facing multiple rejections.
