Self-catering holiday homes across the length and breadth of the UK attract many thousands of visitors each year. The tourist board Visit England regularly inspects more than 30,000 of them, for example.
With demand so buoyant, there is a sound case for investing in holiday let property. To support any such investment, you may typically need a holiday let mortgage – and this guide helps to spell out some of the issues.
Finding a holiday let mortgage
While you might be overwhelmed by the sheer number of lenders offering regular residential mortgages, when it comes to holiday lets, your search may be more of a challenge. By no means are all lenders are prepared to advance a mortgage on such properties.
Holiday lets are very particular types of property. They are not homes in which you live all the year-round. But neither are they standard buy to let properties in which you have long-term tenants on assured shorthold tenancies. So, neither a residential mortgage for owner-occupiers nor a buy to let mortgage for regular landlords is appropriate.
Instead, you need a specialist mortgage for your investment – and, for that, you might want to consult a specialist holiday let mortgage broker.
How a holiday let mortgage broker can help
A holiday let mortgage broker is familiar with the relatively restricted market and may save you time – and money – by identifying not only potential lenders but also those with products most likely to suit your particular needs and circumstances. In many cases, the products available to such a broker may be those which you may not identify – or even be available – if you are conducting your research unaided.
Your mortgage lender recognises your holiday let investment as a business proposition – from which you plan to generate income from rents. The assessment of that rental income, therefore, plays a large part in any lender’s consideration of your application. Clearly, the income you may expect depends on the standard of accommodation the property offers, its location, and the popularity of the area for visitors.
Typically, this is a more difficult assessment than for a standard let property, where assured shorthold leases ensure a more regular and dependable rental income than the short-term, high turnover of paying guests at your holiday let.
For that reason, the loan to value (LTV) ratio of any holiday let mortgage you are offered may be lower than for a standard buy to let mortgage – in other words, you may need a larger deposit.
Nevertheless, certain tax advantages may boost the profitability of any holiday let.
If the property is let as furnished accommodation and available for letting for at least 210 days of the year (on a short-term basis of fewer than 31 days each letting period), you qualify for tax relief on certain capital gains – such as entrepreneurs’ relief, business asset rollover relief, loans to traders, and gifts of business assets.
The furnished property also qualifies you for capital allowances on your purchase or replacement of items such as furniture, fixtures, and equipment. The profits can also count as earnings for pension purposes.
If you are interested in investing in a holiday let, therefore, why not discuss your plans with a holiday let mortgage broker today.