Compare Holiday Let Mortgages

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Investing in a holiday let property can be an exciting venture and buy-to-let landlords are turning to this market in droves in the face of punitive regulation. If you’re thinking of dipping your toe in this market, read this guide and compare rates here at Propp.

With the prospect of earning steady rental income and enjoying personal use of your property, it's no surprise that many individuals are considering purchasing a holiday let. However, before you start looking for properties and tenants, it's important to secure the right finance. In this article, we'll explore the ins and outs of holiday let mortgages and provide tips for finding the right lender to finance your property.

Understanding Holiday Let Mortgages

First, let's define what a holiday let mortgage is and how it differs from a traditional residential mortgage. In essence, a holiday let mortgage is a type of finance designed specifically for those who plan to rent out their property as a holiday home. As such, it tends to have different requirements and loan terms than a standard mortgage.

One of the main benefits of a holiday let is that it can provide a reliable source of income through rental payments, at a time when the buy-to-let landlords are being subject to stringent regulation.

How do Holiday Let Mortgages Differ from Traditional Mortgages?

There are several key differences between holiday let mortgages and traditional residential mortgages. For one, lenders typically require a higher deposit on a holiday let property, often around 25% to 40% of the purchase price. This is because holiday-let properties are considered higher-risk investments due to their seasonal nature and reliance on tourism.

Another key difference is that lenders look at the rental income potential of the property when assessing your eligibility for a loan, as opposed to your income. In some cases, they may require that the property is already generating rental income, while in others, they will base your eligibility on the projected income potential.

It's also worth noting that holiday let mortgages may come with higher interest rates and fees than traditional mortgages. This is because lenders are taking on more risk by financing a property that is primarily used for short-term rentals.

How Much Can I Borrow Against a Holiday Let?

As with any mortgage, how much you can borrow will depend on your financial situation, deposit size, credit history, and the property you want to purchase. The maximum loan available to you for a holiday let mortgage is based on the rental income you can expect to earn from the propert. Generally, lenders require that the rental income covers at least 125% of the mortgage repayments; in some cases, this can be as high as 145%.

It's important to note that the amount you can borrow against a holiday let will also depend on the location and type of property. For example, a holiday let in a popular tourist destination may be more attractive to lenders than a property in a less desirable location. Similarly, a property that is well-maintained and has modern amenities may be more appealing than an older property that requires significant renovations.

Another factor that can impact how much you can borrow is your own financial situation. Lenders will typically assess your income, expenses, and credit history to determine your borrowing capacity. If you have a stable income and good credit score, you may be able to borrow more than someone with a less stable financial situation.

Finally, the maximum loan you can get will be impacted by how much deposit you have available. Lenders typically go up to 75% LTV, which means you’ll need to put 25% of the funds in yourself. If you have £50k, this means you’ll be able to borrow up to £200k.

It's also worth noting that some lenders may offer more flexible lending criteria for holiday let mortgages. For example, they may be willing to consider rental income from other properties you own, or they may consider personal income – this is referred to as top-slicing.

How much deposit do you need for a holiday let?

If you're considering buying a holiday let, one of the most important things to consider is how much deposit you'll need. The size of your deposit you have will directly impact the amount you are able to borrow.

Typically, you should expect to contribute at least 25% of the property's value as a deposit. This means that if the holiday home costs £200,000, you'll need to have a deposit of at least £50,000. However, some lenders may require a higher deposit, so it's important to work with a broker who can advise you on the best route to take.

It's worth noting that the more substantial your deposit, the better the mortgage terms you're likely to receive. This is because a larger deposit reduces the lender's risk, making you a more attractive borrower. As a result, you can access the best holiday let mortgage rates, which could save you thousands of pounds over the life of your mortgage.

When calculating how much deposit you'll need, it's important to factor in other costs associated with buying a holiday home. These may include legal fees, stamp duty, and survey costs. You should also consider ongoing costs such as maintenance and insurance.

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Assessing Your Eligibility for a Holiday Let Mortgage

Before you start applying for holiday let mortgages, it's important to assess your eligibility and understand what lenders are looking for. Here are a few factors that may affect your eligibility:

Income Requirements

Lenders will typically look at your income to ensure that you can afford the mortgage payments, especially during times when the property is not generating rental income. This means you'll need to provide evidence of your income, such as tax returns or payslips, during the application process.

It's important to note that lenders may also consider any other debts or financial obligations you have when assessing your income. This includes things like other mortgages, car finance and credit card debt. Make sure to have a clear understanding of your overall financial situation before applying for a holiday let mortgage.

Credit Score and History

As with any type of finance, your credit score and history will be taken into consideration when applying for a holiday let mortgage. A higher credit score will increase your chances of approval and may also result in more favourable loan terms.

If you have a less-than-perfect credit score, it's still possible to qualify for a holiday let mortgage. However, you may need to provide additional documentation or take other steps to demonstrate your creditworthiness to the lender. One way to reduce the risk to the holiday let lender is to place additional property down as security.

Property Location and Type

The location and type of property you're looking to finance will also play a role in your eligibility. Lenders may look at factors such as the property's proximity to popular tourist destinations, the level of demand for holiday let properties in the area, and any specific regulations or restrictions governing holiday lets in the location.

For example, if you're looking to finance a holiday let property in a rural area with limited tourist traffic, lenders may be more hesitant to approve your application. On the other hand, if you're looking to finance a property in a highly sought-after tourist destination, you may have an easier time qualifying for a mortgage.

Rental Income Potential

Lenders will also look at the potential rental income of the property. They may require that the property be generating a certain amount of rental income already, or they may project its potential income based on market trends and other factors.

It's important to have a clear understanding of the rental income potential of the property before applying for a holiday let mortgage. This may involve researching local rental rates, occupancy rates, and other factors that could impact the property's ability to generate income.

Overall, assessing your eligibility for a holiday let mortgage requires careful consideration of a variety of factors. By understanding what lenders are looking for and taking steps to demonstrate your credit worthiness and financial stability, you can increase your chances of qualifying for a mortgage and securing your dream holiday let property.

Choosing the Right Lender for Your Holiday Let Mortgage

Buying a holiday home is an exciting investment opportunity. However, financing a holiday let can be more complicated than a standard residential mortgage. It's important to choose the right lender to ensure that you get the best holiday let mortgage deal possible.

Once you've assessed your eligibility and have a good understanding of what you're looking for in a holiday let mortgage, it's time to start shopping around for lenders. The good news is, you’re in the right place at Propp! We let you compare hundreds of lenders on our site, then you can speak to a member of our expert team who can guide you through the rest of the process.

Here are some factors to consider when choosing a lender:

High Street Banks vs. Specialist Lenders

While high street banks may be a logical choice for a standard residential mortgage, specialist lenders tend to have a more tailored offering for holiday let mortgages. This is because they have experience and expertise in the holiday let market and may be more likely to offer favourable loan terms.

Specialist lenders may also have more flexibility when it comes to assessing your eligibility for a holiday let mortgage. They may consider your projected rental income or offer more lenient criteria for self-employed borrowers.

Compare Holiday Let Mortgages

Be sure to shop around and compare holiday let mortgage rates and fees from multiple lenders. While interest rates may be slightly higher for holiday let mortgages, you'll still want to ensure that you're getting a competitive rate that works for your budget.

It's also important to consider the fees associated with a holiday let mortgage. Some lenders may charge arrangement fees, valuation fees, or early repayment charges. Make sure you factor these fees into the deal when assessing whether it is a viable project.

Lender Reputation and Customer Service

Finally, consider a lender's reputation and customer service when making your selection. Reading reviews online and doing research on their track record can help you make an informed decision and feel confident in your financing partner. But, there really is no equivalent to using an experienced broker that knows the strengths and weaknesses of every lender and can advise you on the best route to take.

By taking the time to consult a broker to compare holiday let lenders and explain your options, you can be confident you’re making the right decisions.

Preparing Your Application for a Holiday Let Mortgage

Are you excited about the prospect of owning a holiday let property? It's a great investment opportunity that can be much more lucrative than a traditional buy-to-let property providing you hit your occupancy target. Plus, you acquire a holiday home you can use yourself. However, before you can start enjoying the benefits of your holiday let, you need to secure a mortgage. Here are some tips to help you prepare your application and increase your chances of success.

Gathering Necessary Documentation

When applying for a holiday let mortgage, you'll need to provide your broker with various documentation. This includes tax returns, bank statements, proof of address and proof of income. It's important to gather all of these documents ahead of time and ensure that they're organized and easily accessible. This can help speed up the application process and prevent any delays or issues.

Additionally, it's a good idea to review your credit report before applying for a holiday let mortgage. Lenders will use your credit score and history to determine your eligibility and interest rate. By checking your credit report ahead of time, you can identify any errors or issues that need to be addressed before submitting your application.

Creating a Realistic Business Plan

A business plan is an essential component of your holiday let mortgage application. This document outlines your goals, objectives, and projections for the property's rental income and future growth. It should also include information about your target market, marketing strategies, and any potential risks or challenges.

When creating your business plan, it's important to be realistic and conservative in your projections. While it's tempting to be overly optimistic, lenders will be more impressed by a well-researched and realistic plan. This can demonstrate that you have a clear understanding of the market and your property's potential.

Tips for a Successful Application

Before submitting your application, take the time to review it carefully. Ensure that all of the information is accurate and complete. If the lender requests any additional documentation or information, provide it promptly to avoid any delays or issues during the approval process.

It's also a good idea to work with a broker who specializes in holiday let mortgages. We can help you navigate the application process and identify lenders who are more likely to approve your application.

Additionally, we can provide valuable advice and guidance throughout the process. Having worked with hundreds of clients who have built or are building portfolios, we’re well-placed to support you throughout your property investment journey.

By following these tips, you can increase your chances of success when applying for a holiday let mortgage. With the right preparation and documentation, you'll be one step closer to owning your dream holiday let home.

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Is it Hard to get a Holiday Let Mortgage?

Are you considering purchasing a holiday let property, but unsure of the mortgage process? While obtaining a holiday let mortgage may be more challenging than a standard buy-to-let mortgage, it is still possible with the right preparation.

One reason holiday let mortgages are considered riskier investments is due to their location. Typically, holiday let properties are situated in popular tourist destinations, leaving them vulnerable to seasonality and market fluctuations. This means that during the off-season, you may struggle to find renters for your property.

In addition to seasonality, ensuring consistently high occupancy rates can be more challenging than with a standard long-term rental property. However, with the right marketing and advertising, you can attract occupants all year-round.

Despite these challenges, there are lenders who specialise in holiday let mortgages and can offer competitive rates. It's important to have a good credit history and sufficient funds for a deposit before applying for a holiday let mortgage.

The best thing you can do is work with an experienced broker, and thankfully you’re in the right place. At Propp, we let you compare rates and then you’ll be assigned a dedicated broker who will handle this application and all future applications for you.

Our team work with holiday-let landlords daily, ranging from those just moving over from buy-to-let to those with established large portfolios.

With the right preparation and support, obtaining a holiday let mortgage can be a smooth process, especially when you come to Propp.

Calculating the Cost of a Holiday Let Mortgage

Before deciding on a holiday let mortgage, it's essential to consider the full cost of the mortgage and to budget accordingly. This includes the deposit, fees, and interest payments; you should also factor in any other costs associated with owning the property, such as maintenance, insurance, and taxes.

Although holiday let properties generate a higher yield than standard buy-to-lets, you have to consider potentially extended periods of un-occupancy in the off-season. With this in mind, do your numbers still stack up?

Compare Holiday Let Mortgages

When comparing different holiday let mortgages, it's essential to consider the interest rates, repayment terms, and fees involved. Look for a mortgage with a competitive interest rate and manageable monthly payments. You should also compare the fees across different lenders, including arrangement fees, legal fees, and valuation fees.

This is where we come in! On our site, you can get an idea of the rates available. Then, when you’re ready, you can speak to one of our advisers who are qualified to give advice and know the market like the back of their hand. Your adviser will ensure you get the best terms available on the market, before driving your deal to completion.

Are Holiday Let Mortgages Riskier Than Standard Mortgages?

While holiday let mortgages may have more risks associated with them compared to standard buy-to-let mortgages, they can still be a profitable investment with the right management and planning. Ultimately, it's up to the individual investor to weigh the risks and rewards and decide whether a holiday let mortgage is the right choice for their financial goals.

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* bespoke quotes supplied the next working day following provision of all required lender information being supplied and validation by Propp case manager

† saving based on annualised interest rate saving where deal optimiser service negotiated a lower rate than lender’s published rate, based on current average saving of 0.9% and average loan £1051785. Time saving based on automated versus manual bespoke rate requests.

The solutions above refer to unregulated products only. Should you require a regulated loan please contact us. As a mortgage is secured against your property it could be repossessed if you do not keep up the mortgage repayments. Commercial mortgages and some forms of bridging, development and buy to let finance are not regulated by the financial conduct authority.