Different ways to finance your holiday home

There is a big boom in holiday home buying in the UK. As the idea takes off, more and more people want to get in on the act. Holiday homes in the more attractive areas are already spiralling in price out of many people’s reach.

Some people are solving the problem of buying a holiday home by clubbing together with friends or other family members. An increasing number of lenders are willing to offer a holiday home mortgage on a joint ownership basis, which allows the lender to take up to four incomes into account in agreeing the loan.

This can be an excellent solution for your holiday home mortgage if you can’t afford one on your own. But of course, if you are going down this route, it is crucial that you and all the other parties look very carefully at all the legal implications, and that a watertight and detailed legal agreement is drawn up. This will need to take account of what happens if one party loses their income or decides to withdraw; whether equal repayments should be made if the parties have different levels of income; and if a bigger share of the deposit, and/or bigger monthly payments, should mean a bigger stake in the ownership of the property.

Some people are finding that an intriguing alternative to a holiday home mortgage is what is known as “fractional ownership”. This means that, instead of buying a whole property, you buy a share or fraction of it. That gives you a corresponding proportion of the year to use it, either for yourself or to rent out. This is NOT the same as a timeshare. You are a part-owner of the property, you have a stake in its rising value, and you can sell your share at the current market rate.

Many people are finding that this makes sense, since nobody uses a holiday home for 52 weeks in the year. The property is managed, so you don’t have to worry about its upkeep when you’re not there, and it’s all ready for you when you arrive.

Lenders in the UK have been reluctant to provide a holiday home mortgage for a fractional ownership, but recently one or two have started to do so under strict conditions. Undoubtedly more will do so as the resale potential becomes clearer.

So if you can’t afford a holiday property all to yourself, or don’t want to take on that much responsibility, there are alternatives that make the whole situation easier.