Holiday home finance – FAQs Mar 27th
Here we’ll be examining some of more commonly asked questions arising from holiday home finance.
Can I use my own residential property as a holiday let?
Typically yes – but there are a few caveats:
- it would be advisable for you to notify in advance and seek the approval of, your existing mortgage provider. They may decline permission or seek to re-arrange your existing mortgage. That’s because the use of your property will be changing significantly. Failing to obtain their permission might put you in breach of your mortgage terms;
- any existing owner-occupier insurance on the property would need to be changed to holiday letting cover;
- in some situations, you may need the approval of your local authorities or perhaps the national authorities in Scotland, Wales and Northern Ireland.
Why are holiday home mortgages considered different?
It’s simply because they are not the same thing as an owner-occupier or landlord mortgage.
There are similarities of course but a holiday home mortgage is just different in several respects:
- you may consider the property as an investment for your own future rather than just a business if you intend to retire to it at some point
- you may use it partly as your home, and partly to generate holiday rental income. The property might sit partly unoccupied for weeks or months and have multiple people staying in it for short periods over the holidays;
- it is not necessarily your primary residence, or a property you let out all the time
All these things matter to lenders and that’s why a special category of mortgage product exists for people considering such an investment.
How easy is it to get a holiday home mortgage?
When it comes to financing a holiday home, you’ve got different options to explore, such as traditional loans, home equity lines of credit, and mortgages. Additionally, there’s an alternative called bridging loans, which according to Sam O’Neill at Bridging Loans Direct (or other experts from similar companies), can be a speedy solution if you’re in need of quick finance.
However, it’s crucial to note that each option comes with its own set of advantages and drawbacks. Therefore, taking the time to thoroughly research all these options is essential before making any decisions.
To begin with, a lot will depend upon the specifics of your situation. That includes all the traditional factors relating to how much capital you have available as a deposit, how much the property is really worth when measured against its asking price and your personal overall financial status etc.
However, there are other considerations too. Some conventional mortgage lenders can be a little reluctant when it comes to financing the purchase of a holiday home or holiday let property. That’s because it’s not their core business stream.
By contrast, there are specialists in holiday home finance and they typically will regard this as business as usual.
Do the same evaluation criteria apply for holiday home lending?
In generic terms yes but in detail terms, perhaps not.
You will need to be seen as having an overall financial position that can support your purchase and the repayment of any borrowing made against it.
However, you may see:
- a slightly reduced LTV (Loan To Value) advance – in other words, you may have to find a slightly higher percentage deposit than with a mortgage for the purchase of a primary owner-occupier residence;
- typically, the lender will base their calculations on the rental income .
A specialist provider of holiday home finance should be able to provide further guidance on this one and it’s worth remembering that there may be significant variations in one lender’s conditions to those of another.
Are there tax implications associated with holiday property purchases?
This covers a number of areas including Capital Gains Tax, Income Tax, Stamp Duty Land Tax and many other issues.
In practice, there are approaches here that can be tax advantageous but we would always recommend that you seek the advice of a suitably qualified tax adviser
Can I purchase a holiday property anywhere in the UK I wish?
In principle yes, providing your application for holiday home financing meets the requirements touched on above.
What is important is less where it is and more how the location affects a potential lender’s perceptions of the price being asked by the vendor and the probability of you being able to generate enough income to pay the mortgage from letting it for some weeks per year for holiday purposes
Mar 27th
Here we’ll be examining some of more commonly asked questions arising from holiday home finance.
Can I use my own residential property as a holiday let?
Typically yes – but there are a few caveats:
- it would be advisable for you to notify in advance and seek the approval of, your existing mortgage provider. They may decline permission or seek to re-arrange your existing mortgage. That’s because the use of your property will be changing significantly. Failing to obtain their permission might put you in breach of your mortgage terms;
- any existing owner-occupier insurance on the property would need to be changed to holiday letting cover;
- in some situations, you may need the approval of your local authorities or perhaps the national authorities in Scotland, Wales and Northern Ireland.
Why are holiday home mortgages considered different?
It’s simply because they are not the same thing as an owner-occupier or landlord mortgage.
There are similarities of course but a holiday home mortgage is just different in several respects:
- you may consider the property as an investment for your own future rather than just a business if you intend to retire to it at some point
- you may use it partly as your home, and partly to generate holiday rental income. The property might sit partly unoccupied for weeks or months and have multiple people staying in it for short periods over the holidays;
- it is not necessarily your primary residence, or a property you let out all the time
All these things matter to lenders and that’s why a special category of mortgage product exists for people considering such an investment.
How easy is it to get a holiday home mortgage?
When it comes to financing a holiday home, you’ve got different options to explore, such as traditional loans, home equity lines of credit, and mortgages. Additionally, there’s an alternative called bridging loans, which according to Sam O’Neill at Bridging Loans Direct (or other experts from similar companies), can be a speedy solution if you’re in need of quick finance.
However, it’s crucial to note that each option comes with its own set of advantages and drawbacks. Therefore, taking the time to thoroughly research all these options is essential before making any decisions.
To begin with, a lot will depend upon the specifics of your situation. That includes all the traditional factors relating to how much capital you have available as a deposit, how much the property is really worth when measured against its asking price and your personal overall financial status etc.
However, there are other considerations too. Some conventional mortgage lenders can be a little reluctant when it comes to financing the purchase of a holiday home or holiday let property. That’s because it’s not their core business stream.
By contrast, there are specialists in holiday home finance and they typically will regard this as business as usual.
Do the same evaluation criteria apply for holiday home lending?
In generic terms yes but in detail terms, perhaps not.
You will need to be seen as having an overall financial position that can support your purchase and the repayment of any borrowing made against it.
However, you may see:
- a slightly reduced LTV (Loan To Value) advance – in other words, you may have to find a slightly higher percentage deposit than with a mortgage for the purchase of a primary owner-occupier residence;
- typically, the lender will base their calculations on the rental income .
A specialist provider of holiday home finance should be able to provide further guidance on this one and it’s worth remembering that there may be significant variations in one lender’s conditions to those of another.
Are there tax implications associated with holiday property purchases?
This covers a number of areas including Capital Gains Tax, Income Tax, Stamp Duty Land Tax and many other issues.
In practice, there are approaches here that can be tax advantageous but we would always recommend that you seek the advice of a suitably qualified tax adviser
Can I purchase a holiday property anywhere in the UK I wish?
In principle yes, providing your application for holiday home financing meets the requirements touched on above.
What is important is less where it is and more how the location affects a potential lender’s perceptions of the price being asked by the vendor and the probability of you being able to generate enough income to pay the mortgage from letting it for some weeks per year for holiday purposes
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