Growing demand for holiday let mortgages

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 good news is a holiday let mortgage could help you realise your dream, boost your income and it comes with tax benefits too.

The holiday let sector has gone from strength to strength during 2021, 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

The number of holiday let mortgage deals on the market has more than doubled in a year, according to the latest financial data.

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.

INCREASED RISK

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

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.

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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