Holiday homes are a place to relax, and our aim is to make the mortgage process just as stress-free.
There’s a misconception that arranging holiday home mortgages is a difficult task, however, it can be quite straightforward if you know what you’re doing. That said, there are a few more considerations than with a standard residential mortgage. House & Holiday Home Mortgages can support you through every step of the process, from finding the right lender, to choosing the best type of mortgage for your residential holiday home in the UK.
UK residential holiday home mortgages
When buying a holiday home in the UK, there are several potential incentives for wanting to do it. If you do not intend to rent the property out, you want another residential mortgage for the holiday home. This is largely the same as taking out a traditional mortgage, like you did for your main home of residence.
The main difference between this type of mortgage and a standard mortgage on your primary home is that the lenders will employ a stricter assessment of your finances. They need to know that you are in a position to meet the repayment plans on both mortgages.
It should also be noted that a large deposit will be needed. It'll almost certainly be at least 15%, but many lenders set the threshold to 25%. For this reason, many homeowners may consider re-mortgaging their main home to free up the funds needed to take on the holiday home mortgage.
When you use this type of residential mortgage, there are limitations on how the holiday home can be utilised. Otherwise, you could face financial and legal repercussions. HHH Mortgages can advise you on all aspects of the legal implications while also supporting you through analysing lenders and offers.
Holiday Home Mortgage
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UK Holiday Let Mortgages
Owning a holiday home in the UK is a great way to add a little luxury to your life while building your assets for the long-haul. However, it can also become a revenue generator thanks to short-term rentals. Given that this is a form of investment property; you will need a dedicated holiday let mortgage.
While this type of niche mortgage is often underwritten on an individual basis, they are available from banks and financial institutes across the UK. You must avoid taking a standard buy-to-let mortgage because holiday tenants do not necessarily meet the assured short-hold tenancy criteria.
When taking out holiday home or holiday cottage mortgages, you will need a deposit of at least 25%, although there is a lender who will consider a 20% deposit. Meanwhile, due to the seasonal fluctuation of revenue, the lender will use stringent financial assessments. The lender will make their affordability assessment based on averaging how the property rents out during high, medium, and low seasons, and the different rates it can achieve.
As a typical example, if the average rental over a 30-week period is £800 per week, that would typically mean you could borrow up to around £295,000, provided of course you have a sufficient deposit and meet the lender’s other criteria.
If it sounds complicated, don’t worry. As your go-to holiday home mortgage advisor, we are able to talk you through this and help you understand what level or mortgage is achievable based on those figures.
Finally, you should be aware that the associated fees and interest rates holiday home or holiday cottage mortgages can be a little higher than traditional buy-to-let. Lenders view holiday lets differently because they’ll have a number of guests staying in the property throughout the year. When handled correctly, though, they can be a wonderful asset for you.
Holiday Home Mortgages for overseas properties
Since the introduction of budget airlines, many people consider the prospect of buying a residential holiday home abroad. While this can require a little additional effort, you will have two main options at your disposal; either use a UK lender, or use a bank/lender in the country where you plan to buy.
When using UK lenders, it’s probable that holiday home mortgage products will only be offered by banks that already have offices and a presence in the destination country. This does limit your options, but finding a lender for properties in popular markets like Spain, France, or Italy, should not prove too difficult.
For non-UK lenders, the most likely solution is to partner with a broker in the country of the holiday home. While the exact arrangements do vary from country to country, you will almost certainly need a bigger deposit when taking this path.
As a UK-based holiday home mortgage broker, we don’t arrange mortgages for foreign property ourselves, however, do have some great partners that we’ll happily put you in touch with if that’s what you’re looking for.
Other considerations surrounding the holiday home mortgage
When buying a holiday home or holiday let, you must also consider the outside factors. Stamp Duty is perhaps the most important, as you will face a 3% surcharge. So, if you’re buying a property between £125,001-£250,000, the usual 2% stamp duty charge becomes 5%. It’s very important that you fully understand what stamp duty will be due, and your solicitor will help you with this.
There are several other costs to consider during the purchase, such as Insurance, Mortgage fees and maintenance bills. We’ve got some amazing partners that can help you with all your needs. Meanwhile, if the holiday home is located abroad, currency exchange rates require your attention too.
Nonetheless, getting a holiday home mortgages or a holiday let mortgage is still an option that can bring many rewards. To find out more and take the first steps, give House & Holiday Home Mortgages a call today.