The last census (2011) revealed that 246,000 Brits have holiday homes abroad and 1.6million have a second home in the country.
And why not? Buying a holiday property can be great way to have your very own bolthole – whether for your own use; as an investment property that you will let for holiday rentals; or for a holiday let now that will eventually become your retirement home.
Getting the finance
If you are hoping to buy a second or holiday home, then, unless you are the fortunate position of being a cash buyer, you will need to find finance.
What are your options?
You need to decide what you will be using the property for – purely for your own use as a second home, or as a holiday let? This will influence the type of mortgage you will need to arrange.
Getting holiday home finance can sometimes be more difficult than getting a buy to let (BLT) mortgage or traditional home loan. This is because fewer lenders offer this type of loan, plus certain criteria needs to be met, which may exclude some buyers.
The good news is that there are specialist holiday home mortgage providers, such as ourselves, who will endeavour to get you the most appropriate mortgage for your own individual circumstances.
Whatever the purpose of your holiday home, firstly, you will need a deposit – typically 25-40% of the property value. To find the deposit, your options could include using the existing equity in your main home by means of:
- further advance
- a remortgage
- a secured loan
Each lender – and mortgage type – generally has its own set of requirements in order for you to be eligible to apply. For example, with a holiday let mortgage you may find people who are retired may not match the lending criteria for residential mortgage but may be eligible for a holiday let mortgage.
Depending on whether you intend to be the sole user of the property or use it as a holiday let, then you will need to be able to:
- prove you have enough income to cover the mortgage and running costs; and / or
- prove that the property will have a gross rental income of at least 125% of the monthly mortgage amount
Can the property be let?
Before arranging any finance, you will need to check that you are allowed to use the property for the intended purpose – some newer properties in particular may have restrictive covenants. It is not uncommon to find that new build properties cannot be used for normal residential occupation and must be used wholly or partly for holiday let.
The next step
Making the most appropriate choice when financing your holiday home means you should get the most suitable and cost-effective solution for your own unique circumstances.
Using the services of a specialist broker such as ourselves at Enhanced Wealth means you will have access to a wider range of lenders (and therefore, products) to choose from, rather than going to your bank who generally only offer their own product, which may not be suitable for you. And moreover, in this very niche lending sector it is lilley that your bank do not have a product at all.
Buying a second or holiday home is a major cost – so make sure you get your financing right. For a no-obligation chat, please feel free to get in touch to see how we can help you.