Owning a holiday home has many benefits.
It can be an excellent long-term investment, be a nice little bolt hole for short breaks whenever you fancy them and can provide you with a second income while you’re not using it yourself.
However, buying a holiday home and securing the right mortgage can be fraught with difficulty, especially if you’re planning on using it as a holiday let.
Regular mortgages aren’t suitable for holiday homes. You’ll need one specifically designed for holiday lets. But arranging one yourself is not always easy.
Here we look at the benefits of using a specialist holiday let mortgage broker.
What is a holiday let mortgage, and why do I need one?
As its name suggests, a holiday let mortgage is used to buy a property that the owner plans to rent out to visitors or tourists on a short-term basis.
It’s a type of mortgage designed specifically for holiday properties that have been purchased for investment purposes.
Unlike other forms of property rental, such as buy to let, HMRC recognises holiday lets as businesses that generate ‘earned’ income, rather than investment – or ‘unearned’ – income.
So, while there are some tax incentives for letting a property as a holiday home, there are also some specific HMRC rules associated with them.
If you’re buying a property you plan to let out to holidaymakers, you’ll need a holiday let mortgage.
There are a few things to consider when applying for a holiday let mortgage.
For example, the property must be available for rental as holiday accommodation for at least 210 days a year and let out for at least 105 days. It must also be advertised as furnished accommodation.
However, even if you rent the property out for most of the year, you can still enjoy short breaks there yourself when it’s not occupied.
Which lenders offer holiday let mortgages?
To purchase a holiday property, you’ll need a specialist mortgage. Traditional residential mortgages and most buy-to-let mortgages are not suitable for holiday lets, so you’ll need a mortgage that’s been designed with a holiday let in mind.
Although holiday let mortgages are viewed as a specialist or niche product, several mainstream lenders offer them.
Because there is more risk involved with lending on a holiday let or a second home, many lenders take a more flexible approach to underwriting, provided that the borrower has no adverse credit history, owns their own home and can prove significant regular earnings or income.
Should I use a holiday let mortgage adviser?
Holiday let mortgages tend to be more difficult to arrange than mortgages for domestic properties.
They also differ from buy to let mortgages, which usually aren’t suitable to buy a property used for holiday lettings.
This is because there is no ‘assured shorthold tenancy’ on holiday let properties and the rental income can’t be calculated using standard criteria. Also, local authorities often place usage restrictions on certain holiday let properties.
So, while you can approach a holiday let mortgage lender and try to arrange it yourself, we’d always recommend using a specialist independent holiday let mortgage broker because the application process is more complex.
As well as having more knowledge of the market, what current deals are available and where to get the best deals, specialist holiday let mortgage brokers have in-depth knowledge and understanding of the lending criteria.
Some lenders offer intermediary holiday let mortgages, which basically means they will lend certain mortgages only if an adviser has arranged them. However, there are some direct-only mortgage deals too.
Holiday let lenders will want to make several checks on the property you wish to buy, as well as on your personal circumstances.
Because the application process is more complex than that for a standard domestic mortgage, the borrowers are more likely to experience a few twists, turns and unforeseen issues along the way.
If not resolved, these can often result in the lender not being willing – or able – to continue with the application, sending the borrower back to square one.
A specialist holiday let mortgage broker understands the complexity that exists in the market, keeps up to date with the latest criteria and maintains close working relationships with the main lenders.
They will be able to help you navigate the marketplace, find the best deal and submit a credible application to increase your chances of securing the best mortgage deal for your holiday let property.
Let us help you buy your dream holiday let property
The holiday let mortgage landscape is a niche area that requires specialist expert knowledge to navigate.
Our expert team has over 40 years of experience in the holiday let 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 let property as pain-free as possible. For more information, get in touch today.