In This Article
What are holiday let mortgages in Scotland?
Holiday let mortgages in Scotland are mortgages to buy or refinance properties that are let on a short-term basis.
These are properties that are not let on a standard tenancy agreement for long-term use, for example, one year at a time.
Rather than rent a property out as a standard buy to let property, some people choose to rent the property for short terms, such as one week at a time.
This is usually for holidaymakers or people travelling for work reasons. The main reason that people choose to let their property out on a short-term basis is the higher yield.
Holiday let properties can be lucrative, especially in the high seasons. In addition to this, having a holiday let property also gives you the flexibility to use the property if your mortgage permits this.
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How much can you borrow on a holiday let mortgage in Scotland?
Lenders do not all use the same calculation when working out how much they will lend to you for a holiday let mortgage.
Some lenders work on the amount of income that the property is expected to generate throughout the entire year. This takes into account both the higher and lower seasons, also, allowing contingencies for periods where the property is not let.
Other lenders calculate this based on a standard buy to let stress test. Lenders use different stress tests and these can vary, even depending on a person’s tax status.
Reasons a lender may use a buy to let stress test rather than a holiday let stress test is because holiday lets are generally higher yielding and lenders want to err on the side of caution. Many lenders that want to maximise their rental yield choose to let their property via Airbnb.
Additionally, it is not uncommon for a person to rent out their property as a holiday let and then switch to a buy to let property later due to less work being involved with a standard buy to let property.
Is the interest rate higher for a holiday let mortgage in Scotland than a standard buy to let mortgage?
The rate of interest on a holiday let mortgage in Scotland is usually higher than that of a standard buy to let mortgage.
Lenders believe that holiday let properties are more volatile than standard buy to let properties as bookings may fluctuate.
COVID was an example of this, where people were not able to stay in holiday let accommodation during the peak of the pandemic.
Lenders see income from standard buy to let properties as more consistent than holiday let properties. As a result, holiday let mortgages in Scotland usually incur a higher rate of interest.
This is not always the case though, so talk to your mortgage adviser who can confirm the difference in products.
What are some good holiday let locations in Scotland?
Scotland is a beautiful country and has many picturesque spots attracting tourists.
Some tourists will opt for ample outside space whereas others may enjoy roaming around the colourful cities.
It is hard to say which locations are best for holiday let properties, however, some popular spots are The Isle of Skye, Loch Lomond and Edinburgh. Here is a bit of information about each area.
The Isle of Skye
The Isle of Skye is a large island located in the northern part of the Inner Hebrides in Scotland.
It is the largest and most northerly of the islands in the group, and the second largest after Lewis and Harris. The island has an area of 642 square miles, making it the largest island in the Hebrides and the fifth largest island in Scotland.
The island’s population is around 9,000. The island’s capital is Portree. The island is known for its dramatic landscapes, including the Cuillin mountain range, and its picturesque villages.
The island’s coastline is rugged and includes several sea stacks, cliffs, and caves. The island is also home to a nuseveraldlife, including seals, dolphins, and eagles. The Isle of Skye has a long history and was once part of the Kingdom of Mann and the Isles.
The island was ruled by the Clan MacLeod for centuries, and later became part of the Kingdom of Scotland.
The island was occupied by the British during the 18th century and became part of the United Kingdom in 1801. Today, the Isle of Skye is a popular tourist destination and is accessible by ferry from the mainland.
Loch Lomond is a freshwater loch in Scotland. It is the largest inland stretch of water in the United Kingdom by surface area.
The loch forms part of the boundary between the council areas of Stirling and West Dunbartonshire.
Its southern shore is about 23 miles northwest of Glasgow, and the northern shore is about 30 miles from Glasgow.
Loch Lomond is a popular tourist destination and is featured in the song “The Bonnie Banks o’ Loch Lomond”.
Edinburgh is the capital of Scotland and one of its 32 council areas. The City of Edinburgh Council governs one of Scotland’s 32 local authority areas.
The council area includes the City of Edinburgh’s ceremonial county and Lothians.
It was one of the nine regions of Scotland until it was replaced in 1996 by the unitary council area.
The region covers the former counties of Midlothian, East Lothian, and West Lothian. Edinburgh is located in the southeast of Scotland, in the United Kingdom.
It is the second most populous city in Scotland and the seventh most populous city in the United Kingdom.
The City of Edinburgh Council governs one of Scotland’s 32 local authority areas. The council area includes the City of Edinburgh’s ceremonial county and Lothians.
It was one of the nine regions of Scotland until it was replaced in 1996 by the unitary council area. The region covers the former counties of Midlothian, East Lothian, and West Lothian.
The city is home to numerous historical and cultural attractions, as well as a vibrant nightlife scene. Edinburgh is also a popular base for exploring the rest of Scotland, due to its excellent transport links.
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Do you need a special type of mortgage broker to get a holiday let mortgage in Scotland?
You do not necessarily need a certain type of mortgage broker to arrange a holiday let property in Scotland. However, it is important to look for a mortgage broker with the right experience.
You should look for a mortgage adviser with experience arranging both holiday let mortgages and mortgages for Scottish properties.
You do not need your mortgage broker to be located locally to you as mortgages can be arranged from a distance.
Making sure that you pick a company that you feel comfortable with should be a priority. Remember to read reviews and ask for recommendations if you are looking for a mortgage adviser.
Do I need to have letting experience to qualify for a holiday let mortgage?
Some lenders will require you to already have buy to let experience before offering you a holiday let mortgage for your property in Scotland.
The reason is, they believe there is more work involved in running a holiday let and as a result, letting experience would be beneficial.
Not all lenders have this rule and there is holiday let mortgage lenders that can lend to people with no prior letting experience.
Your mortgage adviser would need to understand your circumstances to recommend a mortgage lender accordingly.
How much do you need to earn to take a holiday let mortgage in Scotland?
The amount that you need to earn to qualify for a holiday let mortgage in Scotland will depend on the lender’s rules.
Some lenders do not have minimum income criteria at all and just need to make sure that you are in a stable financial position to borrow what you need.
Some holiday let lenders do however have a minimum income threshold that you need to meet.
A common minimum income threshold for holiday let mortgages are £25,000, but ask your mortgage adviser to confirm this with you.
The lender will also be factoring in the loan on the expected income of the property.
Your mortgage adviser will be able to talk you through this.
Can I use my holiday let property in Scotland with a holiday let mortgage on it?
Most lenders will allow applicants that own a holiday let mortgaged property to use the property themselves for a certain amount of time each year.
The amount of time that a lender allows you to use the property will depend on their rules.
An example of a common amount of time is 30 days of the year. For the remaining time, the lender would expect you to rent this out on a short-term basis to comply with their conditions.
You should tell your mortgage adviser your intentions with the property, the amount of the time in the year that you plan to let it for and when you plan to use it. They can then look for a suitable lender.
Holiday let properties can be a lucrative way of earning a rental income and Scotland has many beautiful holiday spots.
It may also be possible to use your holiday let property for your getaways.
Taking professional mortgage advice is always very important and Scottish holiday let mortgages are a specialist field.
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