Do I need a holiday let mortgage?

If you are considering purchasing a second property you may have asked yourself this question. Do I need a holiday let mortgage?

Well the answer rather depends on a couple of points because Holiday Let Mortgages are different to standard mortgages.

The main two differences are what the property will be used for and can you afford the holiday let mortgage by yourself or do you need the rental income. Mortgage lenders will always want to know what a property will be used for. Most of the time the property in question will be a main home and will be used as such. Buy to let properties are generally 100% tenant occupied, the owner does not and will not live there and the tenancy is based on an AST.

Second properties however can fall into one of 2 camps. Firstly, you could use your second property simply as a holiday home, friends and family will use it but you will not let the property out to strangers. Secondly, you could occasionally use the property yourself but it will also be let out to holidaymakers to bring in some additional rental income. Most holiday let properties will command high weekly rents in the peak season making the rental option a very attractive one.

Many mortgage lenders are happy for you to buy a second home and use it as a holiday home for friends and family. They will look for your personal income to cover both mortgages together. However, if you intend to rent the property out then a holiday let mortgage will generally be required.

A holiday let mortgage will allow you to use the holiday rental income as the extra ‘salary’ needed to get the mortgage. The rent needs to be a certain percentage above the mortgage payments but as you will be putting in a 15% or 20% deposit the calculation can work nicely. This is basically how a buy to let mortgage will work. If there is a shortfall in the rental income then some lenders will look to see if your own personal income can used to cover the difference.

If you are buying a holiday home you need to find out if there are any restrictions on how the property can be used. Contact the local authority planning department for these details. Some properties have a restriction making them unsuitable as a retirement property as they have to be rented for part of each year. Holiday let mortgages can be granted on these properties but the choice of lenders is limited.

Seeking the advice of an experienced mortgage broker is vital in this market. Many lenders do not openly advertise their holiday home offers and so the help and advice of a holiday let mortgage broker will save you both time and money.

Sean Horton is a Director of Holiday Let Mortgages who also offer a specialist holiday home insurance policy