EVER DREAMED of owning a second home by the coast, or in your favourite UK holiday spot?
Or perhaps you’re looking at a second home from purely an investment perspective.
The holiday let sector has gone from strength to strength during 2022, the surge in UK holidays has fuelled a growing demand for holiday let properties. Many people think this demand for UK staycations is likely to continue over the next few years as restrictions or concerns about travel remain and people feel safer staying in the UK.
SPECIALIST HOLIDAY LET FINANCE
There are now 320 deals available for holiday let mortgages, a growth of 72% since September 2021, according to research by Moneyfacts.
A holiday property cannot be purchased or remortgaged with a normal residential mortgage – even if you intend to live there yourself for long periods. Lenders may only offer a buy to let product but this is unlikely to be suitable.
A holiday rental property represents a higher risk to the mortgage lender. For example, how will the mortgage be paid if you struggle to find people who want to stay in your property? Will you accept all male or all female parties to book the property (together with the attendant risk of hen nights and stag dos threatening to upset not only the neighbours but the local council too).
If you intend to use an existing second home as a holiday let then don’t be tempted to simply not tell your lender about the change in use. Mortgage companies are completely within their rights to demand full repayment of your residential mortgage when they find out you’ve been renting the property out to holidaymakers.
The solution is either:
- For your current lender to issue a ‘consent to let’
- Remortgage over to a holiday let mortgage
Related: Can I remortgage my holiday let?
ARE YOU CONSIDERING A HOLIDAY LET?
The decision to buy a holiday let requires thorough research into popular locations, weighing up tax benefits, reading up on rules regarding residency periods and other potential expenses outside of the cost of buying the property itself, which can feel daunting.
You will need to decide how to market your holiday let, this could be:
- Yourself, via website and social media
- Via a specialist holiday letting agency
- Through one of the online systems such as Airbnb
As holiday home mortgages are rather specialised, your choice of lender is a little limited. The good news is that there is still a reasonable selection of mortgage types for you to choose from, including fixed rate, discounted variable and variable.
Most lenders will prefer you to already own at least one property. But if you intend on buying for investment, rather than living in, then there are some first-time buyer holiday let mortgages available.
Mortgages for holiday lets do cost slightly more than a standard mortgage but the added advantage is that the property can be enjoyed by your family and friends while it is empty.
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- About the Author
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Mark has worked in financial services since 1995, initially as a Financial Adviser and then a Compliance Officer.
He has been a Senior Holiday Let Mortgage specialist at Drake Mortgages since 2001. He is often quoted on lenders websites and can be found in the press, talking about holiday let and available finance.