With the rising popularity of ‘staycations’, purchasing a holiday let property can provide a great income stream – and where better than sunny Sussex?! But getting the right holiday let mortgage requires some key considerations.
Firstly, remember that a holiday let mortgage is not the same as a buy-to-let. Lenders will want evidence that the property is going to be rented out on a short-term basis and not to one, long standing tenant.
A ‘holiday let’ is also slightly different to a ‘holiday home’, at least as far as mortgage lenders are concerned. A ‘holiday let’ will be predominantly let out and allows for some occasional usage by you as the owner. A ‘holiday home’ is the opposite – it’s to be used by you and your family as effectively a second home and not rented out (usually).
Make Sure You Have The Right Type of Mortgage
If you do try and put the wrong type of mortgage on the property, this will likely cause issues during the legal stages and can cause big delays to the process. Top tip – get on the right path from day one, a good, specialist mortgage broker can be a great investment.
When calculating affordability for a holiday let mortgage, lenders will assess the property’s projected income, not your own salary. So even if you’re still working, you’ll need to show strong potential utilisation and rental rates during peak seasons to secure the loan.
They’ll usually ask for a rental forecast letter that details the weekly rates in low, mid and high seasons. From this, they’ll be able to tell you what borrowing is available. As you can see, this is very specific from property to property, so work with a good holiday letting/managing agent!
Holiday Let Mortgage Deposit
Typically, a deposit of at least 25% is required. From time to time, 20% options may be available.
Current Interest Rates
Interest rates on holiday let mortgages are often a touch higher than residential mortgages. There are fixed and variable rates usually available, typically with product lengths of 2, 3 and 5 years. Getting professional mortgage advice can help you find the most suitable option.
Owning and managing a holiday let comes with legal responsibilities too. You’ll need specialist holiday let insurance, safety certificates and licences. But done right, a holiday let can provide an income stream and future nest egg. And there’s nothing quite like owning a gorgeous getaway spot in a favourite British holiday destination!
With prudent financial planning, the UK’s holiday let market offers an exciting investment opportunity. Speak to an expert mortgage adviser today to explore your holiday let mortgage options.
Article produced by House and Holiday Home Mortgages