What is a holiday home?
A holiday home is a second home. In essence, it’s your home from home.
A place of retreat, a change of scenery, and fun.
Because it’s always available for you whenever you want, it’s somewhere for you to go for rest and relaxation. You might go with friends and family to share the space. Or let them stay for free.
No one rents your holiday home therefore you don’t get an income from it.
Your goal is simply to enjoy it. And you’ll need a specialist mortgage…
What kind of mortgage does a holiday home need?
If you’re lucky enough to be looking to buy a holiday home, and you need a mortgage.
Of course, it’s all about affordability.
Lenders will be looking at things like your income/s and any credit or credit card commitments. This includes any mortgage commitments you have on your first home.
They’ll also consider the running costs of both properties.
In reality, most holiday homes or second homes are a luxury.
Because of this lenders need to be absolutely certain you can cover your mortgage costs, all other expenses, plus the everyday running costs of more than one home.
And here are some other things to consider before you think about buying a holiday home:
· A holiday home mortgage is like a residential mortgage in that rates can be fixed, variable, or discounted but…
· A holiday home mortgage can be more expensive because lenders see a higher risk if you’re servicing 2 mortgages (see above).
· You’ll probably need a deposit of around 15-25% — but it can be more like 5-10% in the right circumstances.
· There are usually restrictions on usage… no renting it out! Or if you want to rent it out for the odd week, talk to us, we might have the solution for you.
What is a holiday let?
A holiday let is your second home running as a business.
When you’re looking to buy a holiday let, find somewhere in a lovely place. It could be a rural retreat where stargazers can enjoy clear skies at night… or a great city location where art-lovers can visit galleries.
You get the idea!
A holiday let property is somewhere you or anyone else, wants to go on holiday.
And when it comes to having a mortgage for a holiday let property — you’ll find there’s a limit on how long you can stay there.
So, in contrast to owning a holiday home, your goal with a holiday let is to rent it out on a short-term basis to visitors.
And, as with the holiday home property, you’ll need a specialist mortgage…
What kind of mortgage does a holiday let need?
A holiday let mortgage is like a buy-to-let mortgage – but definitely is not a buy-to-let mortgage.
There are several things that lenders will be looking for:
· The property must be furnished.
· It should be available for short-term lets to visitors tourists etc.
· You’ll need a deposit of at least 20%.
· It must be available for rent for at least 210 days per year.
· And you must be actively renting the property out on short-term let for 105 of those days.
To find out what your rental forecast is, you can ask a local managing agent. Or chat to a mortgage advisor.
Give us a call and we’ll be able to give you some idea of how much income you can expect if you buy a property to let out on a short-term basis and are wanting to explore a holiday let mortgage.
If you want to know more, download our free eBook, an expert and comprehensive guide to holiday let mortgages.
We can also advise you on holiday home or second home mortgages….