A holiday home mortgage can be one of the ways you help you realise that lifelong dream of owning your own holiday home.
Our handy guide will give an insight into how they can work for you.
Here are some of the most common questions in relation to holiday let mortgages: –
How Does A Holiday Let Mortgage Work and Do I Need One?
Where Can I Find a Holiday Let Mortgage?
What Are the Tax Benefits of a Specialist Mortgage?
What Are the Next Steps?
How Does A Holiday Home Mortgage Work and Do I Need One?
If you are looking to purchase a second home and use it as a business (Furnished Holiday Let) and require a mortgage to finance it, then you will need a specialist mortgage. A traditional residential or buy to let mortgage will not allow you to let out your second home, holiday letting with any of these mortgages can be classed as fraudulent.
Mortgages for second homes are different from traditional buy to let mortgages, holiday home mortgages are intended for properties which are let out multiple times across a year whereas a buy to let mortgage is intended for properties dealing with long term lets.
Don’t forget when buying an additional property you’ll need to consider the land transaction tax (stamp duty) & additional premiums. These will need to be considered in your financial calculations.
Where Can I Find a Holiday Let Mortgage?
There are several different providers that can offer a holiday let mortgage. Some of the more well-known ones are Leeds Building Society and Principality. There are also dozens of other small lenders who offer holiday let mortgages.
Deposit requirements vary from lender to lender, and range from 25-40%. You will also need to provide evidence of your income and the potential income from the property to demonstrate affordability. We can provide a mortgage letter outlining how many days we believe the property could be let out for and how much income this can achieve.
With their being a limited number of lenders offering a variety of holiday let mortgages, it may be more efficient to use a mortgage broker. Brokers can find you the best deals for your needs, as well as access deals that aren’t on the market. They will also deal with the provider and do most of the paperwork for you.
Is There a Tax Benefit to a Specialist Mortgage?
If you do go ahead with a holiday let, you can claim certain elements of tax relief. To register as an FHL (Furnished Holiday Let) you must meet the following
- Available to let for short periods that total 252 days or more per year
- Actually, let for 140 days
The valuation office will determine the rateable value of your property based on a number of factors such as type, size, location, quality and projected income.
All this means that you may be eligible for tax relief on your mortgage repayments as well as being able to qualify for small business rates relief.
For more information on Furnished Holiday Let (FHL) taxation and how to qualify as an FHL, click here.
What Are the Next Steps?
Whether you have just had an offer accepted on a property, are in the middle of a purchase or even completed a purchase, the next step is to decide how you are going to let out the property.
Many people choose to let with an agent, such as Menai Holidays. There are many advantages to using an agent as opposed to doing it yourself. Our 5 Things to Consider When Choosing a Holiday Letting Agency blog outlines some of the things you need to consider when choosing the right agent for you.
Please Note: The information contained in this article was accurate at the time of writing, based on our research. Rules, criteria and regulations change all the time, so please contact our prospective new owner team if you’d like to hear how. Nothing in this article constitutes the giving of financial, tax or legal advice to you; please consult your own professional advisor (accountant, lawyer etc). in this regard. If we have referred within the article to a third-party provider of unregulated holiday let mortgages, this is due to the fact that such mortgages aren’t currently regulated by the FCA.
As a helpful reminder, your home may be repossessed if you do not keep up repayments on a mortgage, so again anything you decide to do in this particular area this is one on which you should take your own professional advice on too, as we aren’t providing and can’t provide you with this.
As a holiday letting owner you are responsible for compliance with health & safety laws, regulations and guidance, and for having suitable insurances in place (not Sykes Holiday Cottages or its brands). From time to time, Sykes shares information with you on the topic of health and safety and insurance. When it does so, it is not providing you with advice (legal, financial, tax or otherwise); please seek your own as you see fit. In addition, it is not making any representations or warranties about the information being complete or free from errors or inaccuracies. Sykes shall not be liable for any loss or damage arising under or in connection with your reliance on it.
