Holiday Let Mortgages
Whether you are looking at a property in a UK coastal town or on the sunny beaches of Spain there are a number of different things to consider with a holiday let mortgage, such as whether you want to use it for income purposes or personal enjoyment.
There are a number of factors that can influence your decision either way and depending on the location of your holiday home, there are also different lenders to consider.
Using A Holiday Let Property As A Business
A lot of people use a holiday let as a way to generate income, rather than to purposely stay in it themselves. They usually have numerous occupants across the year and therefore, they require more of a niche mortgage.
When it comes to measuring your affordability and whether you will be able to keep up with the monthly repayments, a holiday let mortgage may be measured differently to a standard mortgage. Lenders could decide to base their loan amount on the figures from a typical rental property in a similar area to yours, or they may speak to a local holiday letting agent for advice.
One of the main reasons why holiday let mortgages are a niche offering is because the rental income they bring in can fluctuate. For example, a cottage in a UK coastal town will attract a lot more occupants in the summer months and therefore, rental income in the winter could be considerably less. This could be a concern to lenders, as come the winter months, you may not able to cover your mortgage repayments.
The most you can borrow on a holiday let mortgage is 75% of the property’s value, but it should be noted that the potential of fluctuating rental income means holiday let properties attract higher deposit payments and interest rates. As is the case with most forms of niche finance, lenders increase deposit and interest rates to compensate for the risk on their side.
Using A Holiday Let Property For Personal Use
Some people invest in a holiday let for their own personal benefit, rather than using it as a form of income. This means a holiday let mortgage won’t be suitable because you are going to be the only people using the property. If you have another property with a mortgage, you would essentially be taking out a second home mortgage for your holiday home.
Bear in mind that your affordability may be assessed on the repayments of your first mortgage as well as your general income, so if you have missed any mortgage payments or paid them late on your first mortgage, you may not be an attractive borrower to a lender and getting a holiday let mortgage may be difficult.
Buy To Let Mortgages vs Holiday Let Mortgages
Although they seem similar, buy to let and holiday mortgages have differentiating factors that will determine which one is more suited to you and your situation.
A holiday let mortgage is more suitable if you have a property that will hold numerous different occupants over the course of your ownership. Whereas a buy to let is for someone who will have tenants on an assured shorthold tenancy.