Ever dreamed of owning a second home by the beach, or in your favourite UK holiday spot? Or perhaps you’re looking at a second home from purely an investment perspective. The good news is a holiday-let mortgage could help you realise your dream, boost your income and it has tax benefits too. The holiday let sector has gone from strength to strength, the surge in UK holidays this summer fuelling a growing demand for holiday-let mortgages. Many commentators think the boom in UK holidays is likely to continue over the next few years as restrictions or concerns about travel remain and people feel safer holidaying in the UK.
SPECIALIST HOLIDAY-LET PRODUCT
The number of holiday-let mortgage deals on the market has more than doubled in a year, according to the latest financial data. A holiday property cannot be purchased or remortgaged with a normal residential mortgage – even if you intend to live there yourself for long periods. Lenders might offer you a buy-to-let product but more likely you will have to obtain a specialist holiday-let product.
INCREASED RISK TO THE LENDER
This is because of the increased risk that a ‘rental’ property represents to the lender. For example, how will the mortgage be paid if you struggle to find people who want to stay in your property? Will you accept all male or all female parties to book the property (together with the attendant risk of raucous hen nights and stag dos threatening to upset not only the neighbours but the local council too). If you intend to use an existing second home as a holiday let then don’t be tempted to simply not tell your lender about the change in use. Mortgage companies are completely within their rights to demand full repayment of your residential mortgage when they find out you’ve been renting the property out to holidaymakers.
ARE YOU CONSIDERING A HOLIDAY LET?
The decision to buy a holiday let requires thorough research into popular locations, weighing up tax benefits, reading up on rules regarding residency periods and other potential expenses outside of the cost of buying the property itself, which can feel daunting. As holiday home mortgages are rather specialised, your choice may be a little limited in terms of lenders, but the good news is that there is still a reasonable selection of mortgage types for you to choose from, including fixed-rate, discounted variable and variable. However, it’s likely that holiday home mortgages carry a slightly higher interest rate than a normal residential product.