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Holiday let mortgages

06/10/2005
Unique New Holiday Buy-To-Let Mortgage Is Good News For Would-Be Investors

Scarborough Building Society is leading the pack by offering the country’s first completely self-funding holiday buy-to-let mortgage.

Its new Base Rate Tracker and Fixed Rate products offer interest rates as low as 5.39 per cent and applicants’ eligibility will be judged according to their property’s potential rental income, rather than their personal income.

The aim of this new holiday let mortgage offering is to give potential investors an easier route towards owning a holiday home, which tend to be excluded from standard buy-to-let mortgage schemes.
Anyone wanting to take out one of the new loans – launched today – will need to put down a deposit of 25 per cent. However, so long as they earn more than £25,000 per year in regular employment and can prove their intended purchase has the potential to generate annual rent worth at least 150 per cent of the mortgage repayments, they should qualify. Should the anticipated rental income fall short, the Society will take account of the applicant’s personal income.

Other features of the new holiday buy-to-let offer include:

Tony Burdin, Head of Retail Strategy, said: ‘Buying property to let has become increasingly popular in recent years. Low interest rates have made mortgages more affordable, and rental income has been seen as an attractive alternative investment to bolster pension provisions.

‘Holiday lets are no exception to this and, with the additional benefit of the valuable tax advantages holiday lets provide over buy-to-let properties, these new holiday let mortgages offer an exciting proposition for would-be landlords.

‘We believe these products are the first ever self-funding mortgages in the UK specifically for holiday homes. This is a welcome development for people who may not have sufficient personal income to support significant loans on both their main and second homes.

‘Given our headquarters’ location in Scarborough, one of the UK’s coastal tourism hotspots, it seems apt that we should lead the way by offering a mortgage of this kind.’

Sean Murphy, Scarborough’s Mortgage Product Manager, added: ‘Holiday Lets offer significant relief on capital gains tax upon the sale of a property, providing it has been owned for two years. What’s more, holiday lettings are recognised by the Inland Revenue as a business, generating earned income, for pension purposes. This differs from other forms of property letting which are classed as investment income.

‘With most lenders yet to enter this market, we would urge anyone thinking of putting some of their long term savings into a second home to give us a call and find out more about what we believe is an unprecedented opportunity. Our skilled advisers will be happy to help them explore the possibilities.’
Offering a simple, open and honest approach to financial services, Scarborough Building Society provides face-to-face customer support through its network of branches and telephone access through Scarborough Direct, on 0845 056 0855.

Customers can also find out more about Scarborough Building Society’s core range of mortgage products from 1 August by visiting their new improved website at www.scarboroughbs.co.uk or via a mortgage intermediary.

Product Details
 Holiday Let – Three-year Flexible Base Rate Tracker
Years 1 to 3 = BOE Base Rate + 0.99 per cent (currently 5.49 per cent)
Year 4 onwards = BOE Base Rate + 1.49 per cent (currently 5.99 per cent) for remaining term
Arrangement fee = £495 (added to loan)
Overpayments can be made up to a maximum of 10 per cent of loan value may be made annually without penalty
Maximum loan-to-value = 75 per cent
Early repayment charges = 4% in year1; 3% in year 2 and 2% in year 3
Holiday Let – Flexible Three-year Fixed
Until 29/11/08 = 5.39 per cent
From 30/11/08 = BOE Base Rate + 1.49 per cent (currently 5.99 per cent) for remaining term
Arrangement fee = £695 (added to loan)
Overpayments can be made up to a maximum of 10 per cent of loan value may be made annually without penalty
Maximum loan-to-value = 75 per cent
Early repayment charges = 4% in year1; 3% in year 2 and 2% in year 3, up to 30/11/08
BOE = Bank of England

NB. To be eligible to apply, potential borrowers must be in paid employment and be earning at least £25,000 per annum. Properties must be located in areas recognised as having an established market for holiday homes. Proof of potential rental income will be required from a recognised holiday letting agent.

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