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A Guide on Holiday Let Mortgages
Welcome to our guide on holiday let mortgages. You’ll find all the information you need to know about holiday let mortgages, why they can be beneficial and how to apply for one with us at St Barts Finance.
Holiday let mortgages are becoming increasingly popular due to the demand for staycations, and uncertainty in the economic climate. With key players like Airbnb and Booking.com, the driving force behind the holiday let market, demand and popularity do not seem to be slowing down anytime soon.
In fact, some experts claim that holiday rentals have the biggest growth potential of all accommodation types. So if you’ve been thinking about applying for a holiday let mortgage, now could be the right time.
If you want some more information keep reading our guide below or you can speak with a mortgage broker right away by booking an appointment. Alternatively, give us a call on 03300 562 218 or drop us an email at [email protected]
What is a Holiday Let Mortgage?
Not be confused with a holiday home mortgage, which is like a traditional mortgage where you borrow money to buy a second home for residential purposes, a holiday let mortgage is devised for individuals who wish to borrow money in order to purchase a property that will be let to tourists as a business.
Furthermore, unlike buy-to-let mortgages, which involve letting out your property on a long term basis, holiday let mortgages are very much different, as they involve letting out your property on a short term basis, which has a number of pros and cons.
The UK is a very popular destination for tourists and locals alike, with places such as Cornwall, Devon and Dorset topping the list of the best places for a staycation.
With so many beautiful things to see and fun things to do, these locations are hot spots for people looking to invest in property and make an additional income.
If you want to start your own property investment journey through the holiday let market, speak with a mortgage adviser at St Barts Finance today.
Pros and Cons of Holiday Let Mortgages
The property market and mortgages associated with it can often be a confusing and overwhelming process, especially for first-time buyers and complex cases such as bad credit mortgages or mortgages in retirement.
However, although there are some disadvantages, there are also many advantages, particularly when it comes to holiday let mortgages which we will discuss below.
Financially rewarding – due to the high demand for staycation areas in the UK, holiday let mortgages can be lucrative as people are willing to pay premiums for accommodation. In fact, during peak season, it’s not uncommon for holiday lets to earn you as much in a week as you would in a month from a typical buy-to-let.
Tax advantages – The HMRC classes holiday lets as a business, so therefore there are a number of tax advantages that can be claimed such as mortgage interest tax relief, the offset of equipment and furnishing costs and expenses such as utilities, property management and advertising.
Can sometimes be less hassle with tenants – Although traditional buy-to-lets are popular due to having a long-term tenant that will pay you a stable rent, this can sometimes be a major headache, particularly if the tenant is difficult or causing you issues. Holiday lets on the other hand may present fewer problems as guests are only there for a short period of time. However, running a successful holiday let business is not without its problems.
Take advantage of the property yourself – With minimal planning and cost which you wouldn’t usually get from a normal holiday abroad, you can use your holiday let when it’s not booked up.
Higher interest rates – Compared with a standard residential mortgage, holiday let mortgages tend to be slightly higher, usually between 2-4%.
No guarantee of income – With varying factors involved, holiday lets do not provide a stable income as you would get with a traditional buy-to-let
Varied prices – How much you charge for your holiday let will be determined by the time of the year. Although you will be able to charge premium prices at peak times, you may have to significantly lower your prices during less popular periods, which could have financial implications.
Time-consuming – In order to take advantage of holiday let tax benefits, your property has to be available for letting 210 days a year, and actually let for 105 days.
Holiday Let Mortgage Criteria
Most mortgages have their own criteria that you will need to meet in order to qualify. Holiday let mortgages are no different and involves specific criteria that must be met.
Most lenders will also have their own set of criteria, so here are a few points to consider.
- Minimum income – Whoever the lender is, their minimum income requirement will probably differ. Typically you will need to provide evidence of employment figures or at least three years of accounts if you’re self-employed. However, some specialist lenders may accept less than this.
- Deposit – You will need to be able to afford a deposit of at least 25% due to the increased risk associated with short-term-lets. The more deposit you can provide the better.
- Rental income – This should usually be 125% to 145% of the interest payable on the mortgage
- Personal circumstance – The Majority of lenders will require that you are 21 years of age or older and that you already own your own home.
Your Holiday Let Mortgage Specialist
Welcome to St Barts Finance, a financial advisor based in the UK that specialises in mortgages, pensions, insurance and investments. With our head office located in Bournemouth, we have helped local and UK wide homeowners find solutions to their financial needs since 2009 when we were founded.
Our ethos is all about 100% customer satisfaction and we are committed to providing our clients with a service that we would expect and want to receive ourselves.
We have a range of experienced and knowledgeable financial advisors who have previously worked for high street banks and building societies, so you can be assured that no matter what your financial situation or circumstance is, we have the right team to help.
With regards to holiday let mortgages, our advisers can provide you with all the information you need and help you with your mortgage application. Our mortgage advisers can also help with a range of other services such as
- First-time buyer mortgages
- Mortgage capacity reports
- Bad credit mortgages
- Equity release
How do I apply?
To apply for your holiday let mortgage today, the best thing you can do is first speak with a qualified mortgage broker to see if you meet the criteria. It’s always best to sit down and talk to a specialist before making any decisions so they can assess your current situation and financial goals.
Holiday Let FAQS
Absolutely! Investing in property can be financially beneficial and an exciting project. Buying a property for a holiday let can be even more financially lucrative as you can typically make more money through higher rent and even save money by offsetting running costs such as maintenance fees and furnishing costs.
However, just as with any profitable business, you will only make your holiday let property successful by investing a lot of time, effort and money into it.
Holiday let mortgages are usually more difficult to get when compared with residential mortgages and typical buy to let mortgages as most criteria stipulate you need a higher down payment of at least 25%.
This is due to the increased risk of only letting out the property for a few days or weeks, which provides less certainty of a stable and frequent income.
However, as with any mortgage application, the criteria is different depending on the lender and the applicant’s current circumstances.
Yes! As holiday let mortgages are not too dissimilar to a standard buy to let mortgage, you’re mortgage lender may be able to offer you either an interest-only or capital plus interest payments mortgage.
This is beneficial as you don’t have to repay the amount you’ve borrowed until the end of the term, however, there can sometimes be an associated pressure with this because you need to make sure you have enough to repay what you owe at the end of term.
If you purchase a property and intend to use it as a holiday let you will need what is called an FHL mortgage, or Furnished Holiday Letting Mortgage.
The demand and popularity of holiday let properties are continuing to increase, so there are now many more mortgage options to choose from.
Holiday let mortgages are typically more expensive because the majority of lenders will require you to have a minimum deposit of around 25% and in some cases even higher.
There is also an increased risk with holiday let mortgages due to the instability of income, so therefore more money is required to put towards the purchase.
No! If you own a holiday let property and have a holiday let mortgage on it, it can only be used to let out to tenants on a short term basis, you’re not allowed to live there.
Equally, you’re not permitted to rent out your home as a holiday let. You will need to go through proper procedures and have the correct mortgage on your property to ensure everything is above board.
Holiday let mortgages are actually more similar than you think to traditional buy-to-let mortgages, however, the main difference is the length of tenancy.
Whilst most buy-to-lets run for a number of months or years, holiday lets tend to only be a matter of days or weeks.
Holiday let mortgage rates vary from lender to lender. In order to get the best rates available to you, it’s always best to speak with a specialist mortgage adviser.
Speak to a Holiday Let Mortgage Broker Today
We are proud to be considered as one of the most trusted mortgage brokers in Bournemouth and surrounding UK areas. Although our headquarters are in Bournemouth, we can help homeowners throughout the entire UK with their mortgage needs.
If we don’t have a local branch near you, we can arrange a video call straight to your phone or PC or simply arrange a call.
To start the ball rolling on your holiday let mortgage or for any additional information, please get in touch with a mortgage adviser at St Barts Finance today. Just give our team a call on 03300 562 210 or send an email to [email protected].
As an alternative, you can use the button just above to talk to a mortgage consultant or use our booking page to arrange a meeting.