If you are planning to invest in a holiday let and need to arrange a mortgage, what considerations do you need to take into account and how might a holiday let mortgage broker be able to help?
Here are some frequently asked questions on the subject.
Why might I need a holiday let mortgage broker?
The differences between standard residential mortgages for owner-occupiers, buy to let mortgages, whole sale lenders mortgages, other commercial mortgages and holiday let mortgages are critical yet often subtle.
A specialist holiday let mortgage broker understands and is familiar with all those differences and is well placed to ensure that you arrange precisely the mortgage you need for the type of property you want to run as a holiday let.
Do all lenders advance holiday let mortgages?
Not all mortgage lenders offer mortgages on holiday let properties.
Not only is your choice more restricted, but some of those that do lend do so only to limited liability companies while others lend only to companies or individuals holding a portfolio – of, say, four or more such properties.
This more limited pool of potential lenders may be another reason for consulting a holiday let mortgage broker, who will, of course, know those that do and those that don’t lend.
Do I have to let a mortgage broker know it is for a holiday let property?
The use of the property as a holiday let demonstrates your intention to run it as a business – successfully or otherwise – based on the rental income it generates.
As a business enterprise, a regular residential mortgage – intended for owner-occupiers – is unsuitable and you instead need a purpose-designed holiday let mortgage.
You are bound to advise any lender that you intend to use the property in this way. To claim that you intend to live in it as your main place of residence, for example, might be considered mortgage fraud – because you were untruthful in the application for the loan. Serious instances of mortgage fraud may result in stiff penalties of fines or even imprisonment.
How do holiday let mortgages differ from residential mortgages?
Because your holiday let is being run as a business, a mortgage lender assesses the affordability of the loan based on the expected rental income.
The value of the property is also likely to determine the amount of the mortgage advance in proportion to the purchase price – the so-called loan to value (LTV) ratio. In the case of a holiday let mortgage you are likely to be offered an LTV of between 60% and 75% – in other words, leaving you to find a deposit of between 40% and 25% of the purchase price.
What if I already own the property, with a buy to let mortgage?
If you already own a property which you have let and are purchasing with a buy to let mortgage, you need to inform your lender of your intention to switch to holiday lettings.
Because most buy to let mortgages are arranged on the understanding of the property being let on assured shorthold tenancies (ASTs) you may need to remortgage the property by arranging a specialist holiday let mortgage.
In summary, using the services of a specialist holiday let mortgage broker will enable you to use their knowledge and expertise to ensure you get the most cost-effective and appropriate mortgage for you – whatever your requirements.