Buying a holiday property can be an exciting as well as stressful experience, so it is important you learn as much as you can about it, before you make any decisions. There are a number of considerations such as:
- is the property purely going to be a second home or are you looking to run it as a holiday let?
- funding your holiday home
- affordability (you can use a holiday let mortgage calculator to see how much your monthly repayments could be)
- associated ongoing costs with the property (such as maintenance, insurances, managing agents fees etc)
- location (is it easy to get to and does it have lots of nearby amenities and tourists attractions? This is crucial if you are planning to let it)
- marketing your holiday property (if you intend to use it as a holiday let)
- and so on
Probably the most important consideration (apart from finding the actual property itself) is funding your holiday home. Unless you are a cash buyer, you may typically need to use any equity in your main property (by way of remortgaging, a further advance, or a secured loan), plus arrange a holiday property mortgage.
How do holiday property mortgages work?
If you are looking for a holiday property mortgage, what do you need to know?
Unlike the traditional home buyers mortgage market where there are many lenders fighting for your business, enabling you to cherry pick the one most suitable for you, the second home mortgage market is slightly different.
There are fewer products and lenders to choose from. This is because some lenders do not like the ‘risk’ of lending on a property where rental income is not as guaranteed as it is with other types of mortgages – especially in the UK where holiday lets may be very seasonal.
We have ascertained that this is a specialist type of mortgage, and with that also comes certain criteria a buyer generally needs to meet. This typically includes:
- a minimum income per year (generally somewhere between £20,000 and £40,000)
- if the property is to be let, then the rental income needs to cover a percentage of the monthly mortgage repayments (typically between 125%)
- a general affordability check to make sure you will be able to cover the cost of the property mortgage (plus any mortgage on your existing home)
- a minimum deposit of at least 25% (some lenders ask for a 40% deposit)
If you do not match these criteria, you still may be able to get a mortgage agreed. At Enhanced Wealth, we have a panel of specialist holiday property mortgages who may be able to help you secure funding on a holiday home, even if you are retired.
Our team of experts are also happy to provide advice and guidance on just about any aspect of buying a holiday home, so please feel free to get in touch.