A quick guide to holiday let mortgages
Purchasing property with a view to using it for holiday letting purposes may be lucrative and a good investment.
However, the question of the holiday let mortgage sometimes causes a little confusion. Let’s clear that up with some key facts.
Holiday let mortgages are ‘different’
Lenders develop their mortgage products based upon a number of factors. One of the most important of those is the nature of the property being purchased, and what it’s going to be used for.
This means that there are different types of mortgage with different terms and conditions (as well as pricing) for things such as:
- owner-occupied primary residences;
- landlord buy to let buildings;
- commercial premises such as shops or warehouses and of course;
- holiday let properties.
You cannot use a property for one purpose if it has a mortgage on it of a different type. For example, if you apply for and are advanced an owner-occupier mortgage, should you then start using your property for holiday lets you may be considered to be committing mortgage fraud.
From the outset, if you’re looking to invest in a holiday let property, you must think about – and apply for – a holiday let mortgage.
Holiday let mortgages aren’t available everywhere
Some traditional high-street mortgage providers may be reluctant to discuss holiday let mortgages while others won’t even consider them.
This is a largely specialist mortgage niche and if you’re to avoid a lot of wasted time, you might be better off going to a specialist provider of holiday let mortgages.
The figures may vary from those you’re familiar with
It’s very difficult to generalise about mortgage offers because so much will depend upon your personal circumstances and the lender concerned.
However, you may find that some of the percentages, calculations and loan conditions may be different to those you might have encountered previously as an owner-occupier, or even as a buy to let landlord:
- your lender may demand that you already own a property and that you have equity in it;
- they may require you to fund a higher percentage of the purchase price from your own finances, perhaps anywhere between 25%-40%;
- typically, lenders will require your potential income as stated in letting projections to exceed your annual loan repayment obligations by a certain percentage.
- you will be required to provide projections from a recognised holiday letting agent to evidence the above.
These are all considerations that are specific to this domain. It is partly why holiday let mortgages are considered a specialised area in lending.
Mixed-use mortgages are available
At times, the use of your property may be hard to specifically and exclusively define as one thing or another. Here are just a few examples:
- a property you live in as your normal home but where parts of it are let out during the holiday season while you’re still in residence;
- perhaps you will live in the property for some parts of the year as your normal place of domicile but plan to let it out to holidaymakers during the season;
- it’s possible you may have a small retail outlet with accommodation attached you wish to let out.
In all these situations and many others like them, you may need what’s called a mixed-use mortgage. By definition, they can’t be described because each case is unique and will require a specialist bespoke mortgage.
These are typically available through those same specialist holiday let mortgage brokers and providers, as many mainstream mortgage providers may find the requirements too varied for their more generalist products.
Holiday let mortgages (and variations of them) usually aren’t considered a standard product by mortgage providers and most don’t offer them at all. For that reason you should go to the right sources.