If you are familiar with the concept of buy to let mortgages, you may be under the assumption that holiday home mortgages are pretty much identical. This is actually a false assumption, as holiday home mortgages are something of a strange product which spans both personal lending and commercial lending spheres.
Lenders will tend to view holiday home mortgages as being a product which is essentially going to create a commercial business in the form of short term holiday rentals of the purchased property. In this case, a different set of criteria comes in to play when discerning the acceptability of an application and in calculating the level of finance that will be made available. So we have a lending product that is one the one hand, clearly a commercial loan and on the other, a product that is more often used by individuals to secure holiday property with no plans of establishing a major business venture.
The entire idea of purchasing residential property to use as buy to let accommodation has become increasingly popular over the last decade. In an effort to expand the possibilities even further, people have begun to look at holiday accommodation to be purchased and used in the same way, holiday home mortgages are specifically designed to enable this form of property investment. One of the major benefits of investing in holiday accommodation is that the income will often be far higher than a similar buy to let residential property. Holiday makers pay far higher prices for a single week’s accommodation than most residential tenants and holiday home mortgages have been designed to take this into account. The vacation market is also perceived to be more stable, and it is deemed less likely that a property will sit empty for an extended period of time; all of these factors affect the application for holiday home mortgages.
In a similar fashion to buy to let mortgages, holiday home mortgages will often provide only around 70% of the overall purchase cost of the vacation property. Applicants for holiday home mortgages will have to find a significantly larger deposit than they would with a traditional residential mortgage. Additionally, many lenders will insist upon a minimum amount of equity in the property that is going to be purchased.
Holiday home mortgages represent an excellent way for individuals to obtain additional property assets which are able to pay their own way. Often the only outlay will be the actual deposit amount, with holiday accommodation being turned over to a management agency and turned in to a profit making venture within a short period of time.
Holiday home mortgages are a relatively new form of financial product, and the entire market is yet to be exploited to its capacity. If we consider the growth in the buy to let marketplace over recent years, it is clear to see that using holiday home mortgages to purchase short term rental holiday accommodation could well become the next big thing.
For more information on holiday let mortgages or holiday homes mortgages please visit www.holidayletmortgages.co.uk