Buy to Holiday Let Mortgages
The growing demand for UK staycations has given rise to new opportunities for those investors looking to start or grow their holiday home portfolios. The buoyancy of the market has also increased the number of lenders offering buy to holiday let mortgages, although this is still a relatively niche product.
Whether you’re buying a new property, or converting an existing property, if it’s intended for use as a holiday rental business, you’ll need a specialist buy to holiday let mortgage. This type of loan is designed for short-term lets, while also allowing you to personally use it as a holiday home at certain times during the year.
To qualify as a holiday let the following conditions apply:
- The property must be furnished and available as a holiday let for at least 210 days (30 weeks) a year
- The maximum length of time for any single holiday let can be no more than 31 continuous days
- The property must be commercially let for at least 105 days in the year
If you are converting an existing property, you must ensure that your current mortgage lender or lease agreement allows for it. It’s also important to check with your local authority to assess whether you need planning permission for a change of property use. Lenders will use a Buy to Let mortgage calculator to assess your applications.
From AirBnB, to more traditional short term rental properties we can find the right finance for your holiday let investment.
We have lenders offering limited company and own name mortgage products, to experienced investors and first time landlords. Whether you are looking for a 50%, 60%, 70% or 80% LTV holiday let mortgage, get in touch today. If it is possible our whole of market status means our team will be able to help.
Holiday Home Mortgages
Whether you’re a first-time landlord, portfolio landlord or a limited company, why not take advantage of our experience and understanding of the buy to holiday let mortgage market? As an independent broker, our friendly team of experts at Vincent Burch Mortgage Services can search for the best buy to let mortgages for holiday homes across a wide network of specialist and high street lenders.
Thinking about a Holiday Buy to Let?
The growth in popularity of UK staycations has created a buoyant market for those landlords looking to generate income from a holiday home. Specialist lender Hodge reported a 173% increase in holiday let mortgage applications in 2021 compared to 2020. And, according to research by Moneyfacts, the number of buy-to-let mortgages for holiday homes has increased by 25% since September 2021, with rates becoming more competitive as a result.
Despite this, the buy-to-holiday let mortgage market is still relatively niche, with products predominantly available from regional building societies and specialist lenders. It also differs from a traditional buy-to-let when it comes to legal, tax and mortgage finance considerations. Here we ask some key questions to help you decide whether becoming a holiday buy-to-let landlord is the right choice.
What is a holiday buy-to-let property?
Firstly, it’s not just a second home. It’s a property bought with the intention of renting it out to holidaymakers for a certain amount of time each year. To qualify for business rates relief it must meet the following criteria:
- The property must be furnished and available as a holiday let for a minimum of 140 days a year.
- The property must be let for at least 70 days a year.
- The maximum length of a single holiday stay can be no more than 31 days.
Are there any tax benefits?
The main advantage is that as a landlord of a furnished holiday buy-to-let, you can still deduct mortgage interest payments from your rental income before paying tax. In contrast, a landlord of a traditional buy-to-let no longer benefits from any mortgage interest relief.
Do I need specialist insurance?
Yes. Standard home insurance will not provide adequate cover for a holiday let property. Instead, you’ll need host insurance specifically designed for short-term letting, available from specialist insurers such as Pikl.
What are buy-to-holiday let mortgages?
As a landlord of a holiday home business, you will need a specialist buy-to-holiday let mortgage. Unlike a traditional buy-to-let where income will be guaranteed for the term of an assured short-hold tenancy, the occupation of a holiday home will constantly fluctuate. As a holiday buy-to-let property can be vacant for periods of time, the risk to the lender increases. As well as uncertain income, maintenance and repairs may go undetected, heating and water can break down and security won’t be as robust.
This increased risk is reflected in many ways:
- The loan amount offered by a is based on an income projection figure rather than a simple multiple of potential rental income.
- You must provide detailed information about your holiday buy-to-let, such as usage, periods of occupancy, rental charged, nights of rental, as well as your existing income and outgoings.
- The deposit needed is typically higher at 25%-30%, although higher loan-to-value products are entering the market each day.
- Interest rates also tend to be higher with buy-to-let mortgages for holiday homes (however, don’t forget you will be able to offset your mortgage interest payments against your rental income).
- The cost of a holiday let mortgage will vary depending on factors such as the size and location of the property, accessibility (foot, road and rail) and overall condition.
There are various ways that lenders in this sector assess landlords’ ability to repay the loan i.e. affordability, and some, although not all, will take into account rental income from the property. First-time landlords can also be considered.
There are also alternative ways to finance the purchase of a holiday let property including buying it outright, re-mortgaging your own home to release equity, extending your mortgage into retirement, or, if you already have most of the capital, taking out a personal loan to secure the rest.
Where can I find the right mortgage?
The best option is to speak to an independent mortgage broker who can give you tailored advice to fit your needs. At Vincent Burch Mortgage Services we combine extensive experience with easy access to buy to holiday let mortgage lenders and a determination to find the right finance deal for our customers.
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Holiday Let Mortgage Advice
What is a holiday let mortgage?
Simply put, a holiday let mortgage is a mortgage designed for people looking to buy a property that will be let out to holiday makers on a short-term basis as a business. It differs from a second-home mortgage, which is a property that will only be used on a personal basis.
Can I get a mortgage on a holiday let?
Holiday homes rented out to the public for profit cannot be purchased with a typical residential mortgage, even if you intend to stay in the property for longer periods of time. You will need to get the correct mortgage for the property use which would be a specialist Buy to Holiday Let mortgage.
Lenders might offer you a buy-to-let mortgage, but you will most likely require a specialist holiday let deal, due to the increased ‘risk’ to the lender.
Can I get a mortgage for a holiday let without owning other property?
If you are applying for a holiday let mortgage, you must already own your own home and be over the age of 21. It is normal to see holiday let mortgages for single and joint owners, but many lenders will allow up to four names on the application form.
Each lender will have their own set of criteria. Lenders will usually stipulate a minimum income requirement and this will vary depending on the lender, this can also be affected by your status as either a sole or joint applicant.
Mortgage lenders will typically expect you to make a minimum gross rental income, and this is known as a stress test.