Offering fantastic yields and diversification opportunities, holiday lets are an increasingly popular investment choice amongst buy to let and commercial landlords. Below, we answer the most common questions about holiday lets mortgages.
With more people opting for ‘stay-cations’, demand for holiday let properties has grown significantly. Many landlords recognise the opportunity these properties offer and are keen to invest in this area.
From seaside retreats to the quirkier properties on offer, below we cover everything you need to know about holiday let mortgages..
What is a holiday let?
As the name suggests, a holiday let is a property that’s purpose is for holidays, typically let out for short periods of time. These properties are generally furnished to a high standard and allow guests access to the whole home with plenty of amenities, such as Wi-Fi, TV, etc.
Do I need planning permission to make a property into a holiday let?
If you already own a buy to let or residential property that you’re planning to use as a holiday let, you won’t need any planning permission, so long as no structural changes are necessary. However, you must ensure you’re on the correct rental property mortgage and that the property has no covenants restricting its use. It’s also worth being aware that some local authorities will insist on you having a special license for the property.
What mortgage do I need for a holiday let?
Whilst some buy to let lenders will offer specific holiday let mortgage products, others will lend under a broader commercial mortgage remit. There are a few lenders that you can access directly, but as a growing mortgage market, it’s worth using a broker to explore all the holiday let finance options available to you.
Can I stay in my holiday let?
Yes! The holiday let regulations state that the property must be available for let for a minimum of 210 days a year to be eligible for holiday let status. Outside of this, as the landlord, you can use the property for yourself, subject to your mortgage T&Cs.
How easy is it to get a mortgage for a holiday let?
Securing a holiday let mortgage is very similar to the buy to let mortgage application process. The types of products available to you will depend on the property value, loan to value, your financial background, and the achievable income on the property. You can use our holiday let mortgage calculator to search the latest mortgage rates and find out how much you could borrow.
While some lenders base their affordability calculations on buy to let rental income, others will look at the achievable holiday let income, which is likely to be significantly higher. Working with an expert broker means they can assess the best option for you and which lender allows you to borrow more for your property investment.
How many lenders offer holiday home mortgages?
As it stands, there are over 20 active lenders in the holiday let mortgage market. The rise of Airbnb and similar sites means that as more landlords invest in the market, more lenders have introduced holiday let mortgage products to their offerings. As this space continues to grow, we hope to see more lenders enter the market, allowing for more competitive mortgage deals.
What interest rates do holiday let mortgages have?
Typically, rates for holiday let properties are similar to buy to let mortgage rates. Rates for personal borrowers will likely be slightly cheaper than for Limited Companies. However, it’s essential to consider the tax benefits that come with investing through an SPV. Please speak to a professional tax advisor before making any property investment decisions.
Lenders typically set a maximum loan to value (LTV) of 75% for both personal and Limited Company applications.
Can I use a residential mortgage for a holiday let?
No. As lenders view these properties as a business, you won’t be able to run your holiday let on your home mortgage. Some lenders may allow you to let out your home on your residential mortgage for a number of weeks per year, but you must check your mortgage T&Cs first.
Can I use my buy to let mortgage for a holiday let?
You will probably need to remortgage onto a holiday let mortgage first. This is because most buy to let mortgage terms require properties to be let on an Assured Shorthold Tenancy (AST) agreement. As ASTs are typically set on fixed terms of six months to three years, the much shorter periods needed for holiday lets are not permitted.
Can I get a holiday let as a first-time landlord?
Yes! You may find that you need to put down a higher deposit, and you’ll likely need a mortgage from a more specialist lender. Speak to a broker with experience in this market (like us!) to review which option is best for you.
Will I have to pay Capital Gains Tax and Stamp Duty Tax on a holiday let?
You will need to pay Stamp Duty Tax and the additional 3% surcharge for second homes and residential investment properties. Capital Gains Tax may be charged on disposal/sale of the property; however, if you purchase a new business, rollover relief may be available.
Please speak to a professional tax advisor for tax-specific questions you may have before making any property investment decisions.
How can I access a larger loan for a holiday let?
If you’re looking to borrow more on your holiday let purchase, alternative options may be available. For example, it may be that investing via an SPV Limited Company will increase your mortgage options – please speak to a professional tax advisor before making any property investment decisions.
It’s essential that you explore all your mortgage options with an expert broker first. Our team of buy to let and commercial mortgage makers have the expertise needed to support you with your holiday let mortgage needs. To see what type of holiday let mortgage rates you could access, call us on 0345 345 6788 or submit an enquiry here.
You might also find our Holiday Let Mortgages FAQs useful.
Find your holiday let mortgage
Are you looking to source a mortgage for your holiday home? Head over to our easy-to-use buy to let mortgage calculator to compare rates or get in touch with one of our expert mortgage brokers who will be able to advise.
