How do I apply for a holiday home mortgage?

The growth of online holiday property letting services like Airbnb, and a renewed focus on staycations in the wake of the global coronavirus pandemic, means many Brits are deciding to take their holidays on these shores instead of venturing abroad.

This has created huge opportunities for people who own – or are looking to invest in – a holiday home.

If you’re looking to buy a holiday property that you plan to let out to tourists on a short-term basis, you’ll probably need a holiday let mortgage to fund the purchase unless you’re a cash buyer.

Holiday let mortgages are specifically designed for people who want to borrow the money to purchase a property to let out to holidaymakers.

HMRC views furnished holiday lets differently from holiday homes, which are primarily bought for the owner’s personal use only. For a property to be deemed a holiday let, it needs to be available for people to let as furnished accommodation for a minimum of 210 days within a calendar year.

Because of the strict rules that apply, many lenders view holiday let properties as a riskier proposition than traditional holiday homes.

The application process is more complex than for a standard mortgage, and there are more checks the borrower needs to pass before their application is accepted.

While some lenders provide holiday mortgages direct to the borrower, many offer intermediary-only deals which must be arranged by a specialist broker.

Here, we take a look at how to apply for a holiday let mortgage and the benefits of using an independent holiday let mortgage broker.

Applying for a holiday let mortgage

If you’re looking to buy a holiday property that you plan to let out to holidaymakers, you probably won’t be able to use a standard residential mortgage to fund the purchase. You will need to seek out a holiday let mortgage instead.

While many holiday let mortgages are available, they aren’t as common as standard mortgages and not all lenders offer them.

The holiday let mortgage market is a niche sector, so unless you have prior knowledge or feel confident in your understanding of the process, it’s always advisable to work with an experienced adviser with specialist experience in the marketplace.

They will be able to find and recommend the best deals, help you understand their terms, conditions and lending criteria, and support your application to give it the best chance of success.   

Most holiday let mortgage brokers also have good relationships with the lenders, so they will be able to iron out any potential problems that may cause your application to fail.

Holiday let mortgages are calculated based on the potential rental income of the property.

While it may generate an excellent rental income during peak season, it may be lower during off-peak times. Lenders tend to look at the rental income over a whole year to assess affordability.

While lending criteria vary from lender to lender, most holiday let mortgage providers will also look at  the following:

  • Your age and income
  • The type of property you’re interested in buying
  • Deposit (the more you can save, the better)
  • Expected rental income
  • Your monthly outgoings and other financial commitments
  • Your credit history

In most cases, your holiday let property will have to provide ‘suitable security’ for mortgage providers to lend against. Your lender will likely examine the property’s deeds to ensure there are no occupancy restrictions that might reduce the value of their security. They may also consider other issues, including:

  • Freehold/leasehold restrictions
  • Whether the property is of standard construction
  • Its proximity to commercial facilities such as pubs, shops or restaurants
  • Shared access issues

When to apply for a holiday let mortgage

If you’ve found a holiday let property you’re interested in, then starting the mortgage application process as quickly as possible is essential.

Before applying for a holiday let mortgage, it’s advisable to do some research, find out which lenders may be able to help, and get an idea of the available deals.

An expert broker, such as House & Holiday Home Mortgages, will be able to help with this, understand your requirements and talk you through your options. We’ll then be able to recommend the best lenders and deals available to you, based on your needs and circumstances.

Our expert team has over 40 years of experience in the holiday home market and is dedicated to taking the stress away from getting the right mortgage.

We’ll provide honest, straightforward advice and guidance on the right way forward and help you arrange the deal that’s right for you to make your investment a holiday property as pain-free as possible. For more information, get in touch today.