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Short Term Mortgages Explained

Mortgage terms generally last for 25 years or more but if you have the ability to pay off a mortgage sooner, you could take out a short-term mortgage instead.

But how long does a short mortgage term last? And why are short-term mortgages sometimes better than mortgages that last for a longer period?

In this guide, we will answer both of these questions and give you more information about short-term mortgages.

But if you have any other questions after reading our guide, please get in touch with us and we will advise you further.

What is a short-term mortgage?

The standard mortgage term is 25 years but most lenders will allow you to take out a mortgage for a longer or shorter term.

The maximum term is usually around 40 years but if you’re looking for a short-term mortgage, you may be eligible for a mortgage that lasts anywhere between 2 years and 15 years.

Due to the shorter term of the mortgage, you will be required to make higher monthly payments as you will paying off the loan in a reduced amount of time. However, savings can still be made as you will pay less interest over the course of the loan term.

The initial rate will usually last between two, three, five, or ten years if it is fixed for a set period of time. If you choose a variable-rate mortgage, the interest rate could change during the mortgage term.

Short-term mortgages are ideal for first-time buyers needing to access money quickly to get on the property ladder or small business owners who want to take out a mortgage while their profits are high. But whatever your circumstances, get in touch with our short term mortgage team and we will let you know if short-term mortgages are right for you.

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Why do people take out short-term mortgages?

There are a number of reasons why people take out a short-term mortgage and these include the following.

1. They are of an advanced age

Getting a mortgage can be difficult when you’re older, especially if you’re at or near retirement age, as you may not have the income available to pay back the loan over a longer term. But if you can prove your ability to afford higher monthly repayments and repay the loan over a shorter term, you may still be allowed a short term mortgage.

2. They want to own their home sooner

If you aren’t prepared to wait 25 years or more to own your home in full, a shorter-term mortgage might be attractive to you.

This means paying more each month but as you’ll be able to pay off the debt quicker and own your home sooner, you won’t have to keep making monthly repayments for an extended period of time.

3. They want to build equity faster

By paying down the loan’s principal balance faster, you can build more equity in your home. This can be ideal for you if you want to release equity for home improvements, debt consolidation, investment opportunities, or any other financial goal.

Can I get a short-term mortgage loan?

If you can meet the criteria set out by the lender, then yes, you should be able to get a short-term mortgage loan.

Criteria can differ between mortgage lenders but usually, they will factor in your age, credit history, current property, employment status, and ability to repay the loan before deciding on whether or not to approve your mortgage application.

What types of short-term mortgages are there?

In the same way that long-term mortgages come with different features and conditions, so too do short-term mortgages. We explain in full in our guide to different types of mortgages but here is a brief account of the types of short-term mortgages typically available from most lenders.

Short-term interest-only mortgages

With a short-term interest-only mortgage, you only pay off the interest each month and not the loan capital. At the end of the mortgage term, you will be required to pay off the remaining loan amount in full.

This option might be useful to you if you want to benefit from lower monthly payments. However, your lender will expect you to have a plan in place on how you’re going to repay the remainder of the mortgage at the end of the term.

Short-term fixed-rate mortgage

With a short-term fixed-rate mortgage, you will have the option of a 2-year fixed rate, 3-year fixed rate, or 5 and 10-year fixed rates. This will give you peace of mind that your monthly repayments won’t increase if UK interest rates rise as we are currently seeing in 2022.

Short-term tracker mortgage

A short-term tracker mortgage is a form of variable mortgage and the interest rate charged will usually fall in line with the Bank of England base rate plus the lender’s percentage.

If the base rate decreases, your monthly payments will also decrease but if the base rate rises, you will have to make higher monthly payments due to the increased interest rate you will be charged. This could make budgeting difficult for you so you should seek the advice of a mortgage broker to determine whether this type of mortgage is right for your financial circumstances.

Short-term offset mortgage

With a short-term offset mortgage, your loan will be tied to your savings account. The interest paid will usually be less on this type of mortgage as it is calculated by deducting the amount in your linked savings account from the mortgage balance.

So, say you had £10,000 in your savings and the balance on your mortgage was £100,000, you would only be paying interest on £90,000, as this would be the mortgage balance offset by your linked savings.

Read our guide on Offset mortgages explained

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What are the benefits of a short-term mortgage?

Shorter-term mortgages come with several benefits. These include the following.

  • You’ll pay less interest overall. You will have to make higher monthly payments over the mortgage term but as these will be payable over a shorter period of time, you will accrue less interest. Provided you take out a fixed-rate loan, you won’t be subjected to interest hikes so if you managed to access lower interest rates at the outset, you will be able to save money over the entire term, even if the bank’s interest rate rises during that period.
  • You can pay back the amount quickly. A longer-term loan comes with financial risks if your finances change for the worse over the course of the mortgage term. This is something that could happen if you’re self-employed, for example, as the loss of a client or two could see a big reduction in your earnings. There is less financial risk if you pay back the amount quickly, provided you have the means to make each repayment.
  • You can get a mortgage if you’re retiring soon. As we mentioned earlier, you may find it difficult to get a long-term mortgage if you’re retiring soon but if you have the ability to make higher monthly repayments over a short period of time, you may be eligible for a short-term mortgage. Your eligibility and the interest rate you are charged will depend on your current income, credit history, and the age you are at the time of your application.

Short-term mortgage vs long term

So, which is better for you, a short-term or a long-term mortgage?

Well, that depends on your financial situation. As short-term mortgages come with high monthly repayments, you might want to pick from the available long-term mortgages if your income doesn’t allow you to cover these higher amounts.

But as long-term mortgages work out more expensive in the long run due to the higher rates of interest payable, you might want to choose a short-term mortgage as the total interest paid will be smaller over the shorter term. As you will also pay off the loan quicker, you will be free of your mortgage debt sooner and this will give you more flexibility with your finances.

Ultimately, there are pros and cons to both short and long-term mortgages so these should be taken into account before you make a decision.

To learn more, get in touch with a member of our team. After learning more about your financial situation and the amount of money you are looking to borrow, we will let you know whether a short-term or long-term mortgage is better for you.

How can I get the best short-term mortgage rates?

To access the best mortgage rates, the first thing you need to do is meet the lender’s criteria. As this is often dependent on income and credit history, you should do what you can to earn enough money for the loan and increase your credit score before making your mortgage application.

This isn’t to say you won’t be offered a mortgage if your earnings are low or if you don’t have a good credit history but depending on your financial situation you may need the help of specialist lenders and this may lead to you having to pay more interest if your circumstances cause the lender to consider you a financial risk.

The next thing you should do is speak to a mortgage broker, such as ourselves. As we are a whole of market mortgage broker, we have access to the majority of mortgage deals on the market, so we will be able to find the lender that can offer the lowest mortgage rates to somebody in your particular situation.

short term mortgage advisors

Speak to a short-term mortgage expert today

If you’re interested in a short-term mortgage, get in touch with our team of mortgage specialists.

After booking your first consultation with us we will show you how short-term mortgages compare to traditional mortgages that are repayable over a longer period and we will make our recommendations to you.

But regardless of the mortgage that you choose, be it a short-term or long-term loan, we will help you save money by finding you a mortgage deal with the lowest interest rates for somebody in your situation.

To learn more, fill out the callback form below and we will be in touch to give you all the advice and support you need on your mortgage journey.

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Short mortgage FAQs

The best short-term mortgage deals come with the lowest interest rates but these will only be available to you if you meet the criteria set by mortgage lenders. If you don’t meet the criteria, you may still be eligible for mortgages from specialist lenders, but you may have to pay more interest over the mortgage term.

At YesCanDo Money, we are here to get you the best short-term loan deal available so get in touch with our team to benefit from our expert services. We are also here to help you get the best deals on longer mortgages if these are the best option for you.

Self-build mortgages differ from traditional mortgages as they are aimed at customers wishing to build their own homes. They are often considered a stop-gap solution as borrowers usually refinance onto a traditional residential mortgage after the home has been built.

As these types of mortgages are offered on a short-term basis, you may be eligible for a self-build mortgage.

To learn more about self-build mortgages and the lenders who offer them, speak to a member of our team today.

Many lenders favour applicants with a regular income from employment but this isn’t the case for every lender. If you’re a pensioner and you need a home loan, we can access those lenders who will give you a short-term mortgage. As you are unlikely to be offered a loan that lasts a long period, this will be the best option for you, provided you meet the lender’s maximum age requirements.

Bridging loans are another way to borrow money in the short term and they are often used by home buyers wanting to raise funds to buy a new home before selling their existing property. They are an alternative to short-term mortgages but as the fees are sometimes higher, they can be more expensive.

With the growing demand for short-term rental properties such as Airbnbs in recent years, many lenders are now willing to offer mortgages to property investors wanting a short-term loan.

As such, it may be possible for you to get a short-term buy-to-let mortgage provided you can satisfy the lender that you meet their criteria.

Not every broker has experience with short-term mortgages but as YesCanDo is a whole of market mortgage broker, we can access a wide range of deals for customers interested in short-term lending.

To learn more about the short-term loans currently available, speak to our expert mortgage brokers today.

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Steve Roberts
Steve Roberts

Stephen Roberts MAQ is the founder of YesCanDo Money, one of the UK's largest no-fee mortgage brokers. With over 30 years of mortgage experience, he has advised and helped thousands of first-time buyers buy their first home and home movers buy their dream home. Speak to a mortgage expert today by completing our contact form:

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