Holiday Home Mortgage
Do you need a holiday home mortgage? We specialise in mortgages for holiday homes, mortgages for second homes, and mortgages for AirBnB.
Below we outline some key information on buying a second home with a mortgage.
Mortgage rates currently available on Holiday Homes from 1.23%
Getting a Holiday Home mortgage – UK Only
The difficulty when seeking a holiday, or second home mortgage is not finding a lender, the majority of mortgage lenders will offer second home mortgages. The difficulty is finding a lender that will offer to you on terms that suit you. This is particularly the case if you are seeking to let the property during the course of the year to generate income.
Holiday home income and income tax
If you already own a buy to let property you may find the income tax on your rental income leave you with very little profit. The good news is that there are special taxation classes for holiday lets where tax arrangements are more attractive.
If your holiday home is classified as a furnished holiday let (FHL), you can deduct the cost of your mortgage from your profit before paying income tax. This is distinct from the situation with buy to let property where you cannot deduct your mortgage costs directly from the profit, instead claiming a 20% mortgage interest tax credit.
To qualify as a furnished holiday let your property must be furnished and located within the UK. It must be available to let for at least 210 days a year, with bookings for at least half of that period (105 days). This leaves you as the owner with use of the property for a maximum of 155 days a year.
Deposit for holiday home mortgages
Most lenders will lend up to 75% of the property value on a second home mortgage. A few will go beyond this to perhaps 80 or 85% loan to value.
It is fairly common when buying a second home to raise deposit funds from your existing home. This is acceptable to most mortgage lenders, subject to affordability.
Of course, if you have cash already to go towards the purchase of your second home, this makes the process easier.
You may be looking to take advantage of a family gift, or a joint purchase of the second home with a friend or family member. We can assist with this, although it will be a problem with some lenders.
No deposit holiday home mortgages
If you have sufficient equity in your current home, it is possible to raise the full purchase price, and purchase costs of your second home without putting in any cash.
Affordability for holiday home mortgages
Meeting lender’s affordability calculations on your second home, can be tricky, particularly as applicants in a position to buy second home may have a variety of sources to support the lending. For this reason use of a mortgage broker is key, particularly if you are buying in a high competition, highly sought-after area, such as Cornwall or Oxfordshire.
Holiday Home – Second Home – AirBnB
How a mortgage lender views your second home will be key to the lending potential. Many lenders lend on second homes which you may hold to avoid extensive commutes, or to provide accommodation for students.
When the property is clearly a holiday home mortgage lending can be more difficult. But lenders can be comfortable until we get to the point where you wish to let the property to generate income. The intention to let your holiday home reduces your lending options further, and the amount of time you can let over the year may be restricted by the lender.
AirBnB is a further complication for the holiday home mortgage lender and further rules may apply.
Insuring your holiday home
Your holiday home mortgage lender will want to ensure that the property is adequately insured as they’re using it as security against their lending. Ordinary buildings insurance is not suitable in most cases due to the limited time you may be using your second home. Make sure you deal with a specialist broker to get an appropriate policy that is satisfactory to your mortgage lender and also meet your own needs in full.
Types of Holiday Home
Our Lenders are interested in Bricks and Mortar, solid construction Holiday Homes as security – they are not interested in:
- Timber Cabins
- Caravans and Park Homes
- Time shares
All of these types of assets need specialist lending channels and we do not assist with funding for them.