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It’s holiday season and as everyone takes a moment to relax in the sun, minds might drift towards creating a more permanent base there. Perhaps opening a B&B or buying a property to rent out most of the year, but something for the family to enjoy too.
Ian Chetwynd, a Mortgage Adviser in Wren Sterling’s Mortgages team explains how a holiday let mortgage differs from regular residential mortgages.
Who can get a mortgage for a holiday home in the UK that they plan to rent out?
Most mainstream lenders will consider holiday let mortgages for existing homeowners in the UK. Specialist lenders may consider non-homeowners, but these would not be widespread. A deposit of 25%-30% is usually required and the affordability will be based on the rent that can be achieved.
As rent varies on holiday lets between the seasons, lenders usually request an assessment of rental income from a holiday let agent to cover high, medium and low seasons in order to get an average income across the year.
Lenders generally allow the owners to use it as a holiday home although there may be some restrictions on the amount of time they can spend there.
How does it differ from an ordinary residential mortgage?
A bigger deposit is required although borrowing can be on an interest only basis if required. Main income is less important than on main residential mortgages although some lenders may require a minimum income level and this is normally around £25,000.
Age restrictions tend to be more generous on holiday lets so the debt would not have to be repaid by retirement age. Rates would normally be higher than those available on residential mortgages although we would search from across the whole of the market to track down the right deal for our clients.
What advice would you give someone looking to buy a holiday property abroad with a mortgage?
Wren Sterling is unable to advise on mortgages outside the UK although we will be able to assist if a client wants to explore raising the funds against a UK property. Of course, the legal risk of buying a property abroad is much higher and there may be implications for other areas of financial planning, so it makes sense to take a joined-up approach with a Wren Sterling Financial Planner.
IMPORTANT: The Financial Conduct Authority does not regulate most forms of buy-to-let mortgages.
Your home/ property may be repossessed if you do not keep up repayments on your mortgage.
