In This Article
What is a holiday let mortgage?
A holiday let mortgage is a mortgage for a property that you plan to let out on a short-term basis. For example, this may be on a nightly or weekly basis for holidaymakers or people requiring accommodation for work reasons.
Many people buy properties located in rural locations for people to rent when they fancy a week away.
Other holiday let investors may choose to purchase properties in city centres popular with on city breaks, or are working in that area.
These properties are often advertised on portals such as Airbnb and holidaylettings.co.uk
A holiday let mortgage is different from a standard buy to let mortgage as buy to let mortgages require tenancies to be long term, for example, one year
It is a breach of the terms and conditions of many standard buy to let mortgages if you rent out the property as a holiday let.
Managing a holiday let property generates more work than a standard buy to let property due to the continuous flow of people using it. Make sure that you learn about what is involved in running a holiday let property before going ahead.
The holiday let mortgage market is large and often requires a complex mortgage, so it is wise to look for an experienced mortgage adviser who can give you your mortgage options.
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How much can you borrow with a holiday let mortgage?
The amount that you can borrow on a holiday let mortgage will vary depending on the lender.
However, a common amount that can be borrowed on a holiday let mortgage is as much as 75% loan to value.
Holiday let lenders calculate your affordability assessment using two common ways.
One way it is to work out what you would generate over a year based on, no, medium and high seasons taking an average of the 3.
They would then factor in a percentage of the time that the property would not be let. This would allow them to work out the maximum loan.
Another way in which some lenders work it out is to calculate what the property would generate on a standard buy to let basis. For example, what the property would achieve monthly with a standard tenant.
The reason that many lenders do this is because it is not uncommon for somebody to purchase a property as a holiday let and then change their mind in the future due to the increased work in managing the property.
Can I rent my property on Airbnb with a holiday let mortgage?
The most common website for renting out a holiday let property is Airbnb. This allows holidaymakers and requiring work accommodation to book a property on a nightly basis.
This can also be great for the property owner as it attracts customers that they would not otherwise have found. In addition to this, Airbnb manages the booking and the payment to the property owner.
Renting out a property on Airbnb can be lucrative, but make sure that you understand all of the risks involved with allowing people that you do not know to rent your property.
What are the risks in renting out a property as a holiday let?
Like with any type of investing, there can always be a risk. You need to make sure that you are comfortable with this before going ahead.
Risks with renting out a holiday let property can include vandalism to the property, periods where there are no bookings resulting in little rental income, holidaymakers refusing to leave the property or things out of anybody’s control, such as pandemics, meaning that letting is temporarily forbidden.
There are also risks with standard buy to let investing so it’s for the investor to understand these before deciding whether an investment is suitable.
Can you use your property when you have a holiday let mortgage?
Lenders have different rules when it comes to allowing a property owner to use their holiday let property when it has a mortgage on it.
Many holiday let lenders do, however, permit the owner to use the property for a certain amount of time each year.
A common example of this is 30 days of the year. This means that the lender can allow you or your family to take holidays at the property in addition to renting it out for the remainder of the year.
This can be a nice benefit over a standard buy to let property as mortgage lenders do not allow you to live in the property with a buy to let mortgage.
Can a first time buyer get a holiday let mortgage?
Most lenders will not lend to first time buyers for a holiday let mortgage. Many will want the applicant to already own a property before buying a holiday let. In some circumstances, some lenders can consider first time buyer buy to let and holiday let mortgages.
You should look for an experienced mortgage adviser who can tell you your options as a first time buyer.
Please complete the contact form if you would like I NEED ADVICE to match you with a knowledgeable mortgage adviser.
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Can you get a holiday let mortgage if you have bad credit?
Not all lenders will lend to people with bad credit, but some lenders can consider holiday let mortgages to these applicants.
Your mortgage advisor will need to know the full details of the bad credit to understand your full situation.
Adverse credit can be many different things so your mortgage broker would need a copy of your credit file to be able to calculate your options. Bad credit can mean bankruptcies, IVAs, arrears, defaults, county court judgements, property repossessions and more.
Once your mortgage advisor knows the full details of your credit background and current situation, they can match you with a mortgage lender accordingly.
To find out more about your credit history go to Check My File and sign up for a free trial.
Do you need a special mortgage broker for a holiday let mortgage?
Holiday let mortgages are generally only available via specialist lenders, therefore it is prudent to look for a mortgage adviser with the right experience to place your situation.
Some mortgage advisers do not advise on holiday let mortgages as they will often stick to the areas that they know best.
You should ask your mortgage adviser if they have experience with placing holiday let mortgages relevant to your own situation.
If you complete the contact form, I NEED ADVICE can match you with a mortgage broker with expertise in the holiday let mortgage market.
Can a limited company get a holiday let mortgage?
A limited company can get a mortgage on a holiday let property.
Not every lender will offer holiday let mortgages to limited companies so you should always take professional advice.
The limited company you need should likely be a special purpose vehicle designed to hold residential properties and not be trading in any other way.
There are however still lenders who would consider trading limited companies for holiday let properties.
This is where an experienced broker is essential as they can understand your limited company and look for a mortgage lender accordingly.
Do you get a better yield with a holiday let property or standard buy to let property?
The reason that many holiday let investors choose over standard buy to let property investing, is down to the higher yield that can be achieved.
This is because renting out a property on a nightly basis usually attracts more money throughout the month or year than a standard buy to let property.
The extra income however is not an expense. Costs are usually higher for a holiday let property due to the extra management involved and there can be periods where demand is low.
This could result in a low income during certain parts of the year.
It is important to understand how the holiday let market works before purchasing a holiday let property.
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Conclusion
It is certainly possible to get a mortgage on a holiday let property and you may even be able to do so with adverse credit or if you are a first-time buyer.
Renting out holiday let properties can be lucrative but there is extra work involved.
You should make sure you fully understand everything involved with a holiday let property before going ahead.
Taking the correct financial advice when looking for a mortgage is always recommended.
If you would like I NEED ADVICE to match you with an experienced mortgage adviser with holiday let mortgage expertise, please complete the contact form.
They are experienced, which can boost your chances of being approved.
