What is a buy-to-sell mortgage
A buy-to-sell mortgage, also called a bridging loan, can help you borrow a large amount for a short period. Find out how it works
Last updated on
May 9, 2025 15:24
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Buy-to-sell mortgages, also called bridging loans, are short-term, interest-only loans. Here’s the what, the why and the how.
If you need finance for a property purchase and you know you’ll be able to repay it within months rather than years, a buy-to-sell mortgage (bridging loan) could be the answer.
But there are risks and costs that you’ll want to know about first.
These loans usually last from a few weeks up to a year and are secured on an existing asset, such as property. They’re designed to “bridge the gap” in finances when you know you can repay the full debt within a year.
They’re interest-only loans, and with some lenders, you don’t make monthly payments but instead repay what you borrowed, plus the interest, at the end of the term, all in one go.
A key aspect of buy-to-sell mortgages is that lenders are more focused on your “exit strategy” – how you’re going to repay the total amount, with interest – and less focused on your income. The exit strategy could simply be that you’re going to sell the property that’s the subject of the loan, or you’re selling another property. As this is the main thing that lenders check, arranging this type of loan is usually fairly fast – it can be just a few days.
All this means these loans are quite different from standard mortgages, which are designed to span years and involve checks on your income.
The main risk is if your exit strategy doesn’t work out and you can’t repay the loan, you could lose your property.
There are several reasons why you might turn to this type of loan.
Buying a new home before selling an existing one. We’ve covered how to use bridging loans for this in a separate guide about buying before selling.
Buying at auction. Got a Homes Under the Hammer dream? Maybe you’ve found a doer-upper to start, or add to, your property portfolio. If the place is in a poor state, you might be planning to renovate and then apply for a buy-to-let mortgage. Otherwise, you might be looking to do up the place and then sell it fast – called “property flipping”.
Renovating a property you’ve inherited and plan to sell
There are two main types of bridging loan.
Your lender will make a “charge” against the property that’s being used as the security for the loan. If you already have a mortgage on that property, the bridging loan will be a “second charge”. If you don’t, it will be the “first charge” on the property. This just means which loan takes priority for being repaid when the property is sold.
It’s important to know that regulated bridging loans are only for people who are securing their loan against a property where they live or intend to live. Otherwise, the bridging loan is unregulated.
Other costs to consider are solicitors’ fees, valuation costs and the lender’s arrangement fee, which is typically 2%.
Some bridging loans may include fees for early repayment or extensions beyond the agreed term.
A bridge-to-let loan is a bridging loan with a particular function, which is to provide funding for landlords to buy or renovate a property, then refinance to a buy-to-let mortgage once the property is ready to be let out for rental income.
The amount of the deposit will depend on the price of the property you’re buying, and the lender. Most lenders want a deposit of between 20% and 40%. It’s common to ask for 25%.
That means the maximum loan, including interest, is normally limited to 75% loan-to-value.
The deposit doesn’t have to be in cash – it can be in the form of security on another property.
Cons
Bridging loans are all about giving you fast, short-term flexibility, especially if you’re buying property that isn’t habitable. But you have to have a solid exit plan for how you’ll pay off the loan. It’s sensible to talk through your options with a broker to ensure you’re making a good choice as there are various types of secured loan, and alternatives which could be cheaper.
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