Holiday let mortgage advice with Chris Towell
When searching for holiday let mortgage advice, at Helpful Holidays we always advise seeking information from a trusted holiday mortgage advisor. One such advisor we have worked with for many years is Chris Towell from AFWM- Atkins Ferrie Wealth Management, who has a wealth of experience in dealing with many different holiday let properties. Chris has joined us today to offer guidance.
What you need to know
If you are thinking of buying a second home as a holiday let, there are many ways you can fund the purchase which will allow you to use it for your own holiday home as well as earning an income for you. When purchasing a holiday let it must be in an area that is frequented by holiday makers. A local holiday letting agent, like Helpful Holidays will be able to give you full advice on potential earnings from the property with a breakdown on low, medium, and high season weekly rentals. They will also be able to advise you on the number of weeks the property could let for. They know their area well and can recommend popular locations on where to consider purchasing.
About holiday let mortgages
The information Helpful Holidays provides you with will give you an annual income which mortgage lenders will use for their affordability checks and to ensure the projected income meets their criteria. Most mortgage providers will lend up to 75% of the property value. Any income generated by the property can be offset against mortgage payments for tax purposes, which a buy to let mortgage does not allow to this extent. A holiday let property can also be utilised for personal use allowing you time to spend in your property. There are some additional expenses with holiday lets, for example a higher rate of stamp duty. Having said this the returns on a holiday let mortgage tend to be higher than a buy to let mortgage.
For a property to count as a holiday let it must be available for letting as a furnished holiday home for at least 210 days of the tax year and it must have bookings for at least 105 days per year. Typically, a holiday let may be occupied by the owner for their own personal use up to 152 days a year.
Example
The client
Has ties to the South West but are currently living in the Midlands. They had previously purchased a property outright to use as a holiday let, using it themselves for frequent holidays in the South West. They choose to instruct a holiday cottage agency to deal with the bookings and management of the property.
The property
A 3-bedroom property in a quiet area on the South coast of Cornwall. The sea is a matter of minutes away, making it an ideal location. The property could do with updating to bring it in line with the ever increasing standards of holiday cottages. This will help to maximise potential income.
The finance
The client was looking to raise £100,000 to complete improvements to the property. Although the improvements were not structural, they would modernize the property without impacting the character. The customer has used most of their savings to purchase the property. This means they need an alternative way of financing the home improvements.
The solution
The lender will use the high, medium and low season figures from the letting agency to ascertain the annual income from the property. This makes the affordability assessment straightforward, giving the customer a clear idea of the money that can be released. Fixing the mortgage for five years on an interest only basis keeps the repayments to a minimum. This allows the customer to budget for the foreseeable future, hopefully increasing the repeat bookings year on year. Along with this, the home improvements have increased the overall value, allowing for the best possible annual income to be achieved from the property.
If you are considering purchasing a holiday home and would like more details on any subject please contact our property team on Let Your Cottage.
For mortgage advice contact chris.towell@afwm.co.uk – Chris Towell at AFWM and he will be able to help provide a more in-depth and personal evaluation for you.
