Holiday let Mortgages
The holiday let business has seen rapid growth in recent years and continues to provide a very strong rental investment. With the onset of potential tax rule changes with the buy to let sector it has meant property investors are looking at alternative markets, and one of which are holiday lets. Read on to find out about how to get finance and some points to consider.
If finance is required to purchase a holiday let or remortgage buy to let onto a holiday let mortgage, it is important to speak to a mortgage broker who specialize and understands holiday let mortgages.
In this section you will find information about holiday let mortgages, some information you can download if you want a general guide and also the difference between buy to let mortgages and holiday let mortgages.
Of course if you are thinking of investing in this type of business, don't forget you are dealing with people so we have created a page all about landlord advice and how to become a Super Landlord.
Investing in property continues to be a popular choice for many. Therefore, if you are considering this type of investment it may be worth taking a look through this section and downloading some of our FREE guides and fact sheets.
Holiday Let v Buy to Let:
You might be wondering what the difference is between a holiday let mortgage and a buy to let? Particularly if the property you are interested in, or the one you own is capable of doing either or even both. There are tax differences, income differences, occupancy differences and different requirements on you and the tenants. To get more of an idea of the things to think about when considering a holiday let mortgage, why not download our guide above.
It is really important to be aware that the rules governing lending are potentially different to the practical considerations of a property. Indeed you might like the idea of renting your property on a holiday let basis in the summer and a buy to let (assured short hold tenancy) in the winter. It might make a lot of financial sense.
However although this seems like a perfectly reasonable thing to do, if you are borrowing money from a lender then the parameters of what you can and can't do are very clear with a mortgage offer.
It is important to know that a buy to let is NOT a holiday let. Not only does the mortgage world and lending rules treat these industry sectors differently, but the tax rules do to. Fundamentally it is a completely different beast and is much more of a hands on property investment proposition than a buy to let. To a certain extent a buy to let is more hands off to a certain extent; you buy, get a tenant and then forget about it, for a while at least. A holiday let involves fluctuating levels of income, different ways to market the property, having to pay the bills for the property, dealing with change overs on a regular basis and different insurance requirements to name but a few.
If you would like to take a read of my blog Holiday let v buy to let click here. Or if you want to look at all our blogs relating to holiday lets, CLICK HERE.
Holiday Let Mortgages:
It is easy to buy a property and rent it to holiday makers, if you don't need to borrow any money. However if you do, it is really helpful and will save you a lot of time, effort and potentially money to speak to a specialist mortgage broker who understands this market really well.
Points to consider for you and also the typical considerations banks will think about:
- Do you own your own home (not a deal breaker but can help).
- Have you experience?
- Is the property going to realistically achieve the level of income you need to service the mortgage?
- Will you continue to have outside income? Or are you chucking it all in!
- What is the location of the property? Some locations are not popular with certain lenders.
- How will you financially manage in the winter season when bookings are down?
- Have you spoken to an accountant? It is important to plan thoroughly, this is a business after all.
- Don't think this will be cheap or easy. You need to be serious and realistic if you want to move forward.
- Get yourself organized with simple steps. Have you got all your bank statements, payslips, or accounts?
- If you are buying or refinancing an existing business, the track record of that business will be important. So get the accounts.
- How are you going to advertise?
- You'll need a deposit of between 25%-50%. But don't think or expect the 25% is a dead cert. A lot will be dependent on how much income the property will generate.
If you would like to ask a question, then you can do it here:
FAQ's: Holiday let mortgages:
- How do I get a holiday let mortgage?
Get in touch with a lender who specialises in holiday let mortgages. Most lenders who lend on buy to lets do not touch holiday lets at the moment, but this could change. Or you could get in touch with an independent mortgage broker who specialise in holiday let mortgages like us. Every lender is slightly different in terms of their lending criteria so what might be okay for one, might not be for another lender. Getting a holiday let mortgage is not easy and unless you have lots of time on your hands you could easily make costly mistakes.
- Are commercial holiday let mortgages any different to standard holiday lets?
Yes and no. The very nature of the mortgage is unregulated just like a buy to let mortgage compared to a residential mortgage. So in that respect they are not different. Where they are different is who the lender is going to be and how they treat it. Some holiday let lenders will treat the holiday let in much the same way as a buy to let within their internal process and procedures. Other lenders will treat the holiday let property as a commercial proposition. What often dictates going from one lender to another, is usually the clients individual circumstances, the property, and what the clients plans for the property are (for example; are they going to use it themselves or is it purely a business).
- Are commercial holiday let mortgages more expensive than standard holiday let mortgages?
Yes, but as rates and lenders criteria change this might not always be the case. Sometimes its not possible to choose one lender over another, as usually its the the clients circumstances that dictate the best option for them. This is usually based on their circumstances, what they are buying and their plans.
- Can I get a holiday let mortgage on my home?
Yes, but you may have to have an onward new residential purchase. Or a plausible plan of where you are going to and why.
- Can I buy a property with a holiday let restriction?
If the property can only be used as a holiday let and not allowed to be someone's main residence, the short answer is yes there are lenders who will be okay with this. It will come down to the individual circumstances of the client and the quality of the property, but it is certainly something some lenders will consider.
- Can I get a mortgage on a holiday park?
The vast majority of mortgage lenders would not lend on a holiday park, however it is sometimes possible to look at alternative finance solutions for holiday parks. It will also come down to what exactly the proposition is and the circumstances of the client. If someone is looking to buy a lodge on a holiday park to holiday let as a business, then this is a good starting point. If that person was also an experienced landlord with a portfolio of buy to lets and holiday lets then this would strengthen a case.
- How much deposit do I need for a holiday let mortgage?
Typically the more you can put down the better and the stronger your case will be considered. Its easy to say you'll need at least a 25% deposit (as this is the minimum) however depending on your experience, your personal circumstances, the property and the income that it will generate, the amount you will need to put down could vary hugely from this figure. Also some lenders will not even consider you unless you put down 40-50% deposit.
- What costs are involved in a holiday let mortgage?
This will depend on the lender and the value of your property that you own or are looking to buy. As such its not really possible to give you a set figure, but rest assured it won't be cheap and you'll have to factor in other costs such as the broker fees, solicitor fees and stamp duty. You might also want to seek advice from an accountant or tax planner as there could be implications here to for you. Despite the fees, if the property is a good holiday let proposition it is likely the income you will generate from it will be significant and it could end up being a great investment.
- What are the tax implications of a holiday let?