Do you dream of owning your own holiday home? Are you considering purchasing a holiday home? Understanding the mortgage process can be complex. At Helpful Holidays we always advise seeking information from a trusted holiday home mortgage advisor.
One such mortgage advisor we have worked with for many years is Chris Towell from AFWM – Atkins Ferrie Wealth Management. He has a wealth of experience in dealing with many different holiday let properties. In this blog we will outline guidance to holiday home mortgages with expert advice from Chris.
Holiday home mortgage advice
Read our guide with everything you need to know when buying a holiday let and applying for a holiday home mortgage. Use the quick links to navigate to a particular topic or read on to find out more.
Holiday home mortgages
Did you know there are specialist mortgages available for holiday home owners and potential holiday home purchasers?
The type of mortgage you will need for your holiday home will depend on how you intend to use the property. The mortgage required for a holiday home to let out to guests, will be different to that of a private use second home.
- Holiday let/holiday home mortgage – Owning a holiday home with the intention to use it for yourself, family and friends but also let it out to tourists/guests.
- Residential mortgage – If you wish to use your holiday home exclusively for your own private use. You cannot let your property out to guests.
It is vital that you seek advice from a qualified mortgage adviser who understands the type of mortgage needed. You will quickly learn there are far fewer mortgage providers for holiday home mortgages. At Helpful Holidays we always recommend you seek information from a trusted holiday home mortgage advisor like Atkins Ferrie Wealth Management.
What are the benefits of a holiday home mortgage?
The big attraction of holiday home mortgages is how the Government perceives the income rental. Furnished holiday lets are considered to be a business by the HMRC, meaning you can deduct certain expenses from your rental income before tax. To find out more read our owner blog ‘holiday homes, tax and all things in between’.
As an example, if your holiday home made £10,000 and the interest £8,000 you would only pay tax on the difference (£2,000).
How to qualify for a holiday home mortgage
There are many criteria that you will have to meet to qualify for a holiday home mortgage. From personal income to credit history, to deposits and rental forecast.
Chris from Atkins Ferrie Wealth Management specialises in mortgages. Together with Helpful Holidays we can help you navigate this tricky area.
Personal income
Some mortgage lenders specify a minimum personal/earned income, some don’t. The minimum income will vary depending on the applicant.
If you are employed, you will need to provide proof of your last 3 months’ wage slips. If you are self-employed you will need to provide two years of accounts as well as HRMC self-assessments.
Holiday home mortgage deposit
To secure a holiday home mortgage you need a reasonable deposit. You should have about 25% of the property’s value.
There are some additional expenses with holiday lets, for example a higher rate of stamp duty.
The property
It is vital to mortgage lenders that your property is suitable to apply for a holiday home mortgage. Each lender will have criteria for this type of mortgage which will be covered during the application process.
Rental forecast
You should be confident that your holiday home will work as a holiday let business.
Here at Helpful Holidays, we can provide full advice on potential earnings for the property with a breakdown on low, medium, and high season weekly rentals. We will also be able to advise on the number of weeks the property could be let for.
The information provided will give you an annual income which mortgage lenders will use for their affordability checks. This will ensure the projected income meets their criteria. At present, mortgage lenders will not accept rental figures from anyone other than a professional letting agent, like Helpful Holidays.
Who provides holiday home mortgages?
Being a niche area there are few organisations who tailor mortgages to holiday homes. It is possible to manage the process yourself, but we highly recommend professional mortgage advice from an independent mortgage expert like Chris Towell at AFWM – Atkins Ferrie Wealth Management.
Let advisers navigate this tricky area and make the right choices for your important investments. For a free of charge first appointment contact Chris who will provide you with a tailor-made solution to meet your needs.
What information do I need when applying for a holiday home mortgage
Your deposit
To apply for a holiday home mortgage, you will need a deposit for the property you wish to buy. We recommend you have at least 25% of the property’s value. Mortgage providers have a maximum allowance on how much they can lend you for your investment property.
Home furnishing
If you intend to let your property out it must meet the specific HMRC criteria. There must be sufficient furniture provided and your guests must be entitled to use the furniture.
Letting intentions
For a holiday home 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 home may be occupied by the owner for their own personal use up to 152 days a year.
Where the property is located
When purchasing a holiday let it must be in an area that is frequented by holiday makers.
At Helpful Holidays we know the West Country very well and can recommend popular locations on where to consider purchasing.
Some mortgage lenders will only lend finances if your property is situated in England and Wales.
Considering buying a holiday home?
It may feel like an overwhelming task when thinking about a holiday home mortgage but with professional advice and support you could make your dream of owning a holiday home a reality.
At Helpful Holidays, our team of holiday letting experts are on hand to offer advice, helping those considering buying a holiday home in Devon or Somerset.
We’re happy to help answer any questions you may have or offer advice on a particular subject. Find out more about letting with Helpful Holidays, request your FREE guide or call our team on 01647 433593 today
For holiday home mortgage advice please contact Chris Towell at AFWM – he will be able to help provide a more in-depth and personal evaluation for you.
* At the time of publishing (Dec 2021), Helpful Holidays has taken all reasonable care to ensure that the information contained in this article is accurate. But, no warranty or representation is given that the information is complete or free from errors or inaccuracies. Generic information is contained within this article and everyone’s financial affairs are different. Further advice should be sought from a mortgage advisor.
