Now might be just the time to invest in a holiday let property.
Brexit is about to be done – but what does that mean for our relationship with countries in Europe? What kind of reception are we likely to get if we go there? How much longer are exchange rates likely to fluctuate?
These might all be reasons for a growing number of people to decide to holiday in Britain – the so-called “staycationers”. The trend is growing, with some 8.6 million Britons planning or having a staycation in this country in 2019 alone – and the highest amount ever recorded.
So, while there’s likely to be an expanding demand to justify your investment in a holiday let, what do you need to know when getting a buy to holiday let mortgage to finance that purchase?
Holiday let mortgages
The important thing to remember is that holiday let mortgages are different to both standard residential mortgages and buy to let mortgages.
Standard residential mortgages are intended for those owners looking to buy their own main home – owner-occupiers. Buy to let mortgages are intended for landlords of buy to let property – and typically contain clauses restricting occupation of the property to tenants granted assured shorthold tenancies (generally, of six months or up to three years).
Since any mortgage lender assesses the risks and affordability of granting a mortgage according to the intended use of a property, you must describe your purpose accurately in making the purchase. If you intend to let it to relatively short-term holidaymakers – as a holiday let – it is essential that the prospective lender knows that fact.
For a holiday let mortgage lender, the risks are associated with your ability to make repayments on the back of the rental income the property achieves. It is more difficult to assess the projected rental income on a holiday let than a property let by assured shorthold tenancies.
You may be offered a holiday let mortgage for a term of between 15 and 25 years, possibly on an interest-only basis. Any lender, however, is likely to restrict the loan to value (LTV) ratio of the advance – the proportion of the mortgage in relation to the full value of the property – to between 60% and 75%. This is compared to the 90% LTV mortgages which might be available to those buying their own home, for example.
Buy to holiday let mortgage brokers
Given the specialist nature of a buy to holiday let mortgage – and the complexities it might involve – you might want to consult an experienced broker in arranging such loans.
A specialist broker is familiar with the particular requirements typically demanded of any holiday let mortgage lender and is well-placed to guide you through the process.
A broker is also in a position to identify those lenders prepared to advance a mortgage for the purchase of a holiday let property. By no means all mortgage lenders do so – and those that do may restrict their lending to particular types of buyer, such as owners of portfolios of multiple holiday let properties or to limited liability companies.
They will also typically have specialist knowledge of areas where holiday let restrictions apply – thereby potentially saving you time and money when considering a property that may have restrictions.