What is the 6-month mortgage rule?

The six-month mortgage rule may have applied to you if you attempted to borrow money against a property that you either inherited or purchased with cash. There is a little-known rule that might significantly impact your capacity to mortgage or sell a property.

The 6-month mortgage rule is a lending criteria imposed by the Council of Mortgage Lenders (CML) to prevent borrowers from remortgaging a property within 6 months of purchase. This rule applies to both purchases of a property that the vendor has owned for less than 6 months

Why is there a 6-month rule?

Following the 2008 financial crisis, the 6-month mortgage rule was implemented to stop borrowers from participating in risky activities like “back-to-back transactions,” in which they would buy a property with a small down payment, remortgage it for a higher amount soon after, and then take their initial investment back. Because borrowers were more likely to default on their mortgages if the value of the property dropped, this practice increased risk for lenders.

How does the 6-month rule work?

Most mortgage lenders will not lend on a property that has been owned for less than 6 months However, there are some exceptions to this rule Some lenders may be willing to lend if the borrower can provide evidence that they have made significant improvements to the property, or if they are purchasing the property from a close family member.

Can you remortgage a new build property within 6 months?

Some lenders will impose the 6-month mortgage rule from the date the new property is registered at the land registry. However, there are also lenders that will use the date you purchased the original land as the purchase date. This means that if the build takes longer than 6 months, you may still be able to remortgage the property using the current valuation.

Can you purchase a home that has been under ownership for fewer than six months?

The CML 6-month mortgage rule also applies to property that is being purchased from a vendor that has owned the property for less than 6 months. Many mortgage lenders will not lend on the property until the vendor has owned it for 6 months. However, there are some lenders that will allow you to purchase a property from a vendor that has owned it for less than 6 months.

Buy-to-let remortgage options within 6 months of purchase

The CML 6-month mortgage rule is most commonly applied to buy-to-let mortgages. In 2018, the majority of buy-to-let lenders prohibited property remortgaging within the first six months of ownership. Still, some lenders will make a loan within six months of the purchase.

Contact Fox Davidson for help with the 6-month mortgage rule

If you are having difficulty remortgaging a property due to the 6-month mortgage rule, Fox Davidson can help. We have access to a wide range of lenders, including some that do not impose the 6-month rule. We can also help you find a lender that will offer you a competitive interest rate and terms.

Here are some additional resources that you may find helpful:

The Council of Mortgage Lenders (CML): https://www.cml.org.uk/
The Financial Conduct Authority (FCA): https://www.fca.org.uk/
The Money Advice Service: https://www.moneyadviceservice.org.uk/

Disclaimer: I am an AI chatbot and cannot provide financial advice.

What is the 6 month mortgage rule?

During the real estate boom of the 1990s and early 2000s, one-day remortgages were a popular method used by buy-to-let investors to purchase properties without requiring a down payment. In essence, they would buy the property with a 2010% or 2015% down payment from one lender and then refinance the following day at the full market value with a different lender. Because of this, the second lender assumed all the risk, and many people suffered severe burns on their fingers when the market crashed. As a result, the 6 month mortgage rule was implemented, according to which the majority of mortgage lenders will not approve a loan against a property until the owner has been registered with Land Registry for six months. Similarly, if you are trying to sell your house and haven’t been the registered owner for more than six months, most (but not all) lenders will view this as sub-selling and won’t lend to the buyer.

The “6-month mortgage rule” explained

FAQ

What is the 6 month rule for mortgage loan?

Rules for a conventional cash-out refinance If you’re hoping to do a cash-out refinance, you typically have to wait six months before refinancing, regardless of the type of home loan you have. In addition, a cash-out refinance usually requires you to leave at least 20% equity in the home.

Which lenders ignore 6 month rule?

Thankfully, not all lenders observe this 6-month rule. Virgin Money, Mortgage Trust, Paragon and a number of other specialist lenders will allow day one remortgages, but with one important caveat: they only allow the remortgage value to be the price paid for the property within the first 6 months.

What is the 6 month rule in selling?

So if you are looking to sell your property and have been registered as owner for less than 6 months, most (but not all) lenders will not lend to a Buyer in these circumstances.

Why do you have to wait 6 months to refinance?

Conventional loans – you can do a rate-and-term refinance right away if you want, but typically not with the same lender. That’s because, before 6-months, the lender may lose their original commission. On the other hand, if you want a cash-out to refinance, you’ll have to wait for at least 6-months.