Financing your Holiday Let

We’ve seen an increase in enquiries for Holiday Let mortgages over the last year or so.

With staycations increasing and continued economic uncertainty, clients are considering short-term holiday lets to get a solid return on property investment, as opposed to a traditional Buy-To-Let option.

Holiday let mortgages are designed for properties which will be let out on a short-term basis as holiday accommodation giving you a flexible way to invest in an increasingly attractive market.

How easy is it to find a lender and how many options are there?

Before you go any further, you will need to consider;

  • Is it a venture purely for profit, or will you want to use it yourself for some or all the time? (If it the latter, it is classed more towards being a holiday home).
  • Is the property currently used as a holiday let, and if so, are accounts available?
  • Will you use a letting agent or try and manage the property and bookings yourself – perhaps through AirBnB?
  • Can you get a prediction from a letting company as to what income will be generated from the property?

Choosing a lender

The choice of lender will vary depending on the answers to the above. If you are planning to use the property yourself, then a lender will look at the case as a second home, and probably rely mostly on your surplus income to cover the costs rather than letting income. If it is primarily to be a letting property, then the income generated or likely to be generated will be paramount. Lenders will however also be keen to know that you can still cover repayments should your letting income slowdown or stop for any reason.

Do not use traditional buy to let loans or a residential mortgage for a holiday let property!

It is important to understand that lenders offer different products for normal buy to let properties (one tenant on a long-term lease) as opposed to holiday let properties (many tenants, very short term lets). If you use a home or a buy to let property as a holiday let, the lender is likely to ask you to repay the mortgage on the property!

The good news is that there increasing numbers of lenders with specialist holiday let products – around 17 at the last review, so there are some options in the marketplace.

Rates and Fees

Rates start at around 2.5% per annum, and you will need at least a 25% deposit towards the purchase, perhaps more. Lenders set up fees are generally around 1.5% to 2% of the loan amount, plus a valuation and legal fees.

If you use a limited company for the acquisition, then you may expect to pay 1% or so more on the interest rate.

Why use Resolute?

Resolute Commercial Finance are an experienced brokerage with a wide range of lenders available to us. We will carefully review your circumstances and the property that you wish to buy. This will enable us to make the best possible case to a lender and maximise chances of success with the best lender for your needs.

Why not contact us to discuss any queries or needs for this, or any other commercial financing requirement – we will be delighted to help!

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