Buying a second holiday home is probably the most expensive decision you will ever make (aside from buying your main home). That is why it is so important to make sure you will be able to comfortably meet the mortgage repayments.
You can get an estimation of how much your monthly payments will be by using a holiday let mortgage calculator.
- simply enter the mortgage amount required (having made sure that you have deducted the deposit – typically 25-40% of the property value)
- complete the boxes – whereas some holiday let mortgages can be obtained at an interest rate of as little as 2.1%, we have allowed for a safety margin a mortgage interest rate of 6%, but this can be adjusted – plus the term you wish to have the mortgage over
- your results will then be displayed both on an interest only basis and a capital and interest rate repayment basis
This should give you a very good idea of your expected outgoings. For a more personalised quote, then please do not hesitate to get in touch with us here at Enhanced Wealth.
Of course, while the monthly mortgage repayments are the biggest cost you will usually have relating to your holiday home, you do need to allow for other costs too …
When buying, make sure you budget for both one-off and ongoing costs, for example:
- solicitors and surveyor’s fees
- stamp duty
- buildings insurance (this could either be holiday let insurance or second home insurance – the two are different)
- if you are intending to use the property as a holiday let, then don’t forget to allow for any associated costs, such as lettings agent’s fees, liability insurance etc
- if the property is going to be a holiday let, will the rental income cover at least 125% of the monthly mortgage amount? This minimum figure is what many lenders require in order to consider a holiday let mortgage
- what about periods of unoccupancy? If you are unable to let the property for several weeks, will you still be able to comfortably meet the outgoings from your own pocket
- The holiday property has to be fully furnished to a high standard, including all the latest IT equipment. After all, it is what you would expect to find if you went on holiday the property
As an aside, if your property is to be a furnished let, then there can be tax benefits, so it makes sense to understand what these are before you buy.
Getting a mortgage
So, the figures all seem to add up, and investing in a holiday let is something you want to move forward with – what next?
Traditionally, the big high street banks tend not to have many holiday let mortgage deals – if any at all – as they don’t like the risk of fluctuating rentals compared to say, a long term buy to let (BTL) situation.
This does not mean that you should apply for a BTL mortgage for a holiday let property. This could be classed as fraud, as you are not using the property for its intended purpose.
Instead, you may wish to seek the advice of specialist holiday let mortgage providers, such as ourselves. We can match you to a suitable product and provide help and guidance throughout the whole process, so that your dream of having a holiday home can come true.