Holiday Let Mortgages

It will depend on several factors and each lender has their own way of calculating how much they will lend you, but in principle they will all consider several key pieces of information. Unlike a homeowners mortgage, the principle driving factor is the potential rental income your Holiday Let property will yield. Here's a quick look at the process:

• You’ll need to have a deposit of at least 20%. Lenders judge a holiday Let mortgage as a higher risk than a standard residential mortgage and expect a higher deposit.
• The lender will then look at the potential rental income you will generate from your chosen property. The projected income needs to be higher than the monthly mortgage repayments to cover any periods when no-one rents it out. You will need to get a Holiday Letting agent to quote for expected weekly rental rates in low, mid and high season for a period of at least 30 weeks. Please get in touch if you would like help finding a suitable Letting Agent to help you with these projections. We’re here to help!
• They will take into account your current income, or financial situation if you don’t work.
• Most will lend up to 60% of the property value, some 75% and one or two 80% of the property value, depending on your personal financial circumstances and the other factors mentioned.
• Most lenders will offer a minimum mortgage value of £50,000 with some offering up to £5million.

• Your age. You will usually need to be over 21 and under 85 years of age.
• Your current income or financial situation. You typically need to be earning at least £20,000 per year or be financially secure.
• Rental income expectations. Most lenders will want to see typical rent per week in the low, medium and high seasons and a 30 week projection of rental earnings. They will usually factor in their own estimations of maximum occupancy and running costs so make sure you provide gross income projections.
• Loan to property value (LTV). Typically the LTV is 60%, with some lenders offering 75% or 80% on occasion.
• Loan size (usually between £50,000 and £1million, with a few willing to lend up to £2million).
• Estimations of the running costs of the Holiday Let property. Mortgage providers will often factor in their own calculations of the cost of running the holiday let.

Don’t worry if your estimations of what you might be able to borrow don’t meet your expectations. Mortgage lenders calculations vary, and we can help you identify the best Holiday Let mortgage provider based on your circumstances. Just get in touch.

Typically, yes, but there are some instances where lenders will not require this. For example, if you live in a property supplied as part of your job.

You can use your holiday let property yourself as long as you make it available for holiday makers to rent for a minimum of 210 days per year and successfully let it out for 105 days. Allowing friends and family to stay in the property for no or reduced rent does not contribute to days let out.

Remember, the Holiday Let mortgage provider will want to know that your projected rental income will more than cover your monthly mortgage repayment costs.

There are a number of advantages, but it ultimately depends on your investment strategy.

Firstly, you get to use the property yourself if you wish.

Another key advantage is the way HMRC views this type of investment. A furnished holiday let is deemed a business and all expenses you incur to generate your rental income, including mortgage interest, can be deducted from your rental income before you are assessed for tax. This is not the case for buy-to-let mortgages suitable for renting out property on a long lease.
We can’t give tax advice, but a good property tax specialist will be able to advise on what’s right for you.

If the property you want to buy as a holiday let needs refurbishment you might not be able to get a holiday let mortgage immediately. This will likely depend on the scale of the work.

However, a bridging loan could be appropriate while the work is being done.  This is because a lender offering a holiday let property mortgage will want it to start making an income as soon as possible.

A bridging loan is a short term loan which doesn’t require monthly payments. Instead, you re-pay the whole amount with interest at the end of the term. This is typically no longer than 12 months.

Typically, the property should be fit to live in. It should also be easy to sell on if need be. Properties on holiday parks, of unusual construction or properties that have restrictions on who they can be sold to, have annexes or more than one property on the title deeds can be a challenge but as specialists, we can discuss fully with you.

As well as paying the mortgage you’ll need to factor in other likely costs associated with the purchase:

• Stamp Duty
• Conveyancing costs
• Solicitor fees
• Furnishing and decoration
• Building and Contents Insurance

There will also be monthly costs to factor in such as:

• Letting agent’s fees
• Weekly cleaning costs and possibly laundry costs
• Regular repairs and maintenance costs e.g., boiler servicing
• Utility bills

A holiday let property is an attractive investment option because the HMRC views a furnished holiday let as a business. This means all expenses you have in connection with the rental income can be deducted before you’re assessed for tax on that income. This includes any interest you pay on your holiday let mortgage. You should always seek tax advice before making any final decisions and we’ll be happy to help you source the right advisors to work alongside us.

The short answer is yes. It’s possible to do this. And in principle it might be a sound plan… but there are pros and cons to take into account before you make this decision:

• Remember the value of property can fall and rental income is not guaranteed. The Covid pandemic made it impossible to rent out holiday properties and some owners were forced to arrange payment holidays with their mortgage company. It is important to be prepared for the unexpected.
• The type of home you want to retire to may not be the most lucrative in terms of holiday rental. It might be better to consider a larger family-sized home for holiday rental now and plan to sell it once you are ready to retire.
• Owning and using your holiday let part time will allow you the opportunity to explore a new area and decide over time if it’s s a place you’d like to retire to.
• Areas change and what looks like a perfect spot now, might not be in 10 or 15 years’ time.
• You’ll also need to ensure you have the right type of mortgage in place for when you do make that switch to living in there.

Yes. What’s on offer can vary so please get in touch with us if you’d  like our help and we’ll try to find a holiday let mortgage that’s right for you.

Yes! There are limited company holiday let mortgages available, but it’s always best to get an experienced accountant’s advice if you’re thinking of buying a holiday let property through a limited company. What’s available varies from time to time so please drop us a line if you need help to buy your holiday let this way.

It might be more difficult to get a mortgage offer, but it all depends on your other circumstances. We can advise you once we understand more about your personal circumstances. Having a copy of your credit report will help us see what’s possible.