Philippa Rudd - EDP Property Column. The 6 month rule

I am a property developer. I recently purchased and renovated a property and now wish to sell the property on. My solicitor informs me that a buyer who requires a mortgage may not be able to obtain one, as I have not owned the property for six months yet. Why can a potential buyer not obtain a mortgage?

The rule, contained in the Council of Mortgage Lenders’ Handbook, aims to prevent sellers from selling a property within six months of purchasing the property. Fraudsters may seek to re-sell a property very quickly for a substantially increased price. This process is called “flipping”, and will usually involve back-to-back sales of the property to limit the time between sales. The rule requires the buyer’s solicitor to inform the lender when a seller is attempting to sell the property when the seller was registered at the land registry less than six months prior to the agreed sale. The lender will not usually lend in that case.

Can I still put the property on the market?

Yes, this is possible, and if a sale is agreed then completion may be delayed until ownership reaches six months in order to satisfy the buyer’s lender.

I bought with cash, but now want to take out a mortgage to recover the cost.

Unfortunately even if you paid cash for the property, the guidelines require that you must wait six months before you can take a mortgage out on the property. Your solicitor will be obliged to reveal this to your lender.

I have also inherited a separate property from a family member and now wish to take a mortgage out on that property in order to fund renovations, is this possible?

Most lenders do follow the six months’ ownership guideline, however there are some lenders which waive the guideline in this scenario. Your solicitor will be required to disclose that you have recently inherited the property. If the six months is almost up, then I would suggest waiting, as it will mean you potentially have access to a lot more lenders. 

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