Holiday Let Deposits
This is one of the easier questions to answer when it comes to holiday lets, as most mortgage companies will need you put down at least 25% if it’s being let out and a minimum of 15% should it be primarily for personal use. If you speak to a specialist lender, you could get away with paying less deposit, but it will depend a lot on your specific intentions of use and your personal circumstances.
How Much Can I Borrow?
The total amount you can borrow for a holiday let property will again depend on variables like what you intend to use the property for (yourself/letting out) and factors like low season inactivity. A lender is most likely to look the income your property offers you across the entire year and use that figure to determine your affordability.
On average, mortgage companies will want to see an annual income that’s at least 125% of the mortgage payments over the year. Again, each lender is different, so a specialist broker is a good way to find the most appropriate deals to match your situation.
When the income over the year is less than the mortgage outgoings, there are also some lenders that will allow you to use your own personal salary to cover the gap. This practice is known as top slicing and will require you provide evidence of your annual salary. Suffice to say that there are no hard and fast rules that apply to all holiday let mortgages, so shopping around should be a given.
The Potential of Airbnb
Since 2008, the world of holiday home letting has been changed forever by the San Francisco-based global operator that is Airbnb. Its existence is hugely welcome for holiday home owners in the UK and further afield, as it offers a great way to boost your occupancy rates for more of the year.
People using the Airbnb website are able to search for homes, apartments and even single rooms for a set stay and by listing your holiday home on Airbnb, you spare yourself much of the hassle of advertising for holiday tenants to produce a healthy flow of custom.
When thinking about buy a holiday let in a particular area, it’s always a good idea to check out the Airbnb website for the kind of booking people are making in that area. It will give you a more accurate feel of the demand that exists for homes like yours. The last thing you want to do is find out this information after you’ve got the keys and realise that your rental projections aren’t what they should be.
Is a Holiday Let with a Buy to Let Mortgage Possible?
In the overwhelming majority of cases, you won’t be able to buy a holiday home with a buy to let mortgage, due to the temporary nature of the tenants you’ll have staying there. The kind of assured agreements you get with standard tenants won’t apply here, so lenders don’t really like the uncertainty this brings.
When you approach a specialist broker for a holiday let mortgage, they will take a look at your circumstances holistically, whilst at the same time scouring the entire market. Also, those who specialise in this particular niche of the property market will have lots of experience in it, so will be able to better advise you.
Thatched Roofs are The Only Exception
Ordinarily speaking, all holiday properties will be subject to the same criteria as each other, unless you have a property with a thatched roof. There’s a very good chance that this issue can be worked around, but again, this further specialism will require the knowledge of a specialist broker.
Repayment Strategies
Usually, your lender will need to know what your repayment strategy is for your mortgage and if you’re mainly using what is likely to be classed as your second home, this will apply. However, if it’s primarily for renting out, rather than your own personal use, lenders are much more likely to be ok with an interest-only mortgage and no long-term repayment vehicle, which will maximise your rental profits.
Holiday Rental Demand
It might seem a little obvious too mention, but having a holiday home in a popular holiday location can be a deciding factor, as it will have a bearing on the demand you get from holidaymakers. Depending on why that particular area is popular will also have a bearing, as not all destinations have their popularity determined by the weather.
For example, the Lake District can yield occupancy for up to 40 weeks of the year, whereas a property near the coast will naturally be more popular when the weather is fair. Other factors to consider include local amenities, whether your property is pet friendly, whether you offer free WiFi and so on. As we mentioned before, Airbnb is a great source of information for this kind of thing.
In Summary
Buying a holiday let should be given as much, if not more consideration than when you buy a home for to live in. There are more variables at work and this presents more of an exposure to financial risk, so it’s important you do your homework and think of absolutely everything, such whether it should be furnished, how much you actually intend to use it yourself and whether it’s an affordable investment for you.
We would always recommend talking to a property professional before making any purchase, which applies even more so with holiday lets. Doing the right amount of prep and employing the services of a specialist mortgage broker is the best way to ensure you navigate this particular journey without encountering any nasty surprises.
