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Holiday Let Mortgage Advice in Cardiff

What’s unique about a holiday let client? And what does that mean when applying for a mortgage?

Holiday let clients are dreamers.

I mean, who wouldn’t dream of owning a holiday home on the coast, at your favourite holiday resort by the beach? Sounds great doesn’t it?
But what if, as well as that, it’s an investment as well? I mean, that’s just being greedy, right?
Maybe, maybe not. You see, it is possible to buy a holiday let property with a mortgage specifically designed for this very purpose.

What’s unique about a holiday let client? And what does that mean when applying for a mortgage?

 

Holiday let clients are dreamers.

I mean, who wouldn’t dream of owning a holiday home on the coast, at your favourite holiday resort by the beach? Sounds great doesn’t it?

But what if, as well as that, it’s an investment as well? I mean, that’s just being greedy, right?

Maybe, maybe not. You see, it is possible to buy a holiday let property with a mortgage specifically designed for this very purpose.


So it’s not a buy to let mortgage then?

No, it’s a holiday let mortgage.
A buy to let property is usually let on an Assured Shorthold Tenancy (AST) agreement for six or twelve months.

A holiday let property has no such restriction.

You can usually let the property for far more than the same priced buy to let property.

Plus, unlike a standard buy to let property, you are allowed to stay in the property for part of the year as well.

So you get the best of both worlds.


Do holiday let clients find it easier to get a mortgage or not?

The problem for holiday let clients is how few lenders there are in the market.

Leeds Building Society have just brought out a holiday let mortgage that requires a 30% deposit.

The Principality and Monmouthshire building societies need a 25% deposit. Also, there are some specialist lenders that will consider a holiday let, so it’s always best to speak to a mortgage broker.

There may not be many lenders to choose from, but the criteria is fairly straightforward.

You need to:

  • Be a homeowner
  • Have a deposit of 25%
  • Earn at least £20,000/£25,000 pa from your job (depending on the lender)

So if you buy for £150,000, you’d need £37,500 (25%)

The lender will consider the income the property will receive during the low, medium, and high holiday seasons. It then uses a calculation, and that will show how much you can borrow.

The lender will also assess whether the property can easily be sold. So a three bedroom terraced property would be fine, but a property in a holiday park wouldn’t. 

Are there specific mortgage products for holiday lets?

Yes, two and five year fixed rates are available. They tend to be a little more expensive than  standard buy to let rates.

There are alternatives to a holiday let mortgage. You could buy it for cash, but then you probably wouldn’t be reading this in the first place.

Or you could raise money on an existing property and buy it that way.

Do I have to pay stamp duty?

Yes. It will be charged at the higher second property rate. These rates change from time to time so it pays to check with us before you apply.

Do I have to pay tax?

Again, yes. Your income from your holiday let has to be declared to HMRC. It’s always best to speak to a tax adviser or accountant.

Can I have an interest-only mortgage?

Yes. It is, of course, your responsibility to ensure your pay the mortgage off at the end of the term.

Again, speak to a tax adviser.

Your tax situation is unique to you. You need to make sure you have the correct method of paying the mortgage off, whether it’s interest-only or capital and interest.

Anything else?

Like any other investment, property is a risk.

At the time of writing (July 2020), we’re gradually coming out of the COVID-19 lockdown.

Thoughts are turning to vacations, or staycations. As soon as the restrictions on movement started to lift, the mortgage market saw the number of holiday let enquiries increase.

As ever, a holiday let is a long-term investment.

Unless you’re going to pass the management of the property to someone else, you need to stay on top of bookings, cleaning, repairs, tax etc.

But as you know, there are some locations in the UK that are tourist hot-spots year after year.

We can’t tell you whether this is the right investment for you. But we can make sure you get the right mortgage.

Need help getting a holiday let mortgage?

Contact Mortgage Search Go now and we’ll have a chat about it and help you get your paperwork and finances in order.

**your home may be at risk if you do not keep up repayments