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Applying for a UK Holiday Let Mortgage
Holiday lets in the UK are increasingly popular, whether looking for a holiday let mortgages UK rent out an existing home or applying for a buy to holiday let mortgage rental product to make a new investment.
There are two primary options:
- Remortgaging a home on a buy to holiday let mortgage.
- Purchasing a second home on holiday let mortgages designed for this type of rental.
Second mortgages can be trickier, given that you'll need to prove affordability for both loans, but can be arranged provided your income demonstrates affordability.
Here we'll explore the best holiday let mortgages 75 LTV rated and what eligibility criteria apply to the most competitive holiday let mortgage rates.
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What are the Eligibility Criteria for Holiday Let Mortgages?
Holiday let mortgages are designed for investment properties rented out on a short-term basis.
Some of the standard buy to holiday let mortgage criteria include:
- Minimum income could be between £10,000 and £25,000, or a threshold of £40,000 depending on the lender.
- Loan size - typically, you can borrow from £40,000 and up to £1 million per property.
- Loan to Value - most lenders require a 25% deposit, with a 75% LTV maximum
- Age - holiday let mortgages tend to be available to applicants over 21, with some lenders putting upper age caps of around 85 on their products.
- Portfolio - in some cases, you will have a maximum number of properties that can be mortgaged with the same lender. That varied from three to ten properties.
- Rental income - lenders will occasionally need evidence of the expected rental income, which needs to be at 140% or more of the mortgage interest payments based on stress-tested interest rates.
What is the Difference between Buy to Holiday Let Mortgages and a Residential Mortgage?
Residential mortgages cannot be used to mortgage a holiday let.
But, if you have a property already and decide to take out a second buy to holiday let mortgage, this can be possible even if you're still living in the property some of the time.
However, the buy to holiday let mortgage lender will likely require clauses. That could include limitations on how the time is split between a residence and holiday let and restrictions on the maximum LTV available.
The key is that residential property, a buy to let investment, and a holiday home are all different scenarios, and you need to be clear about your intentions.
A buy to holiday let mortgage secured against a property used for another purpose than that declared can be considered a breach of contract and have severe consequences.
Can I Apply for a Normal BTL Mortgage, Or Do I Need to Consider Holiday Let Mortgages UK?
Buy to holiday let mortgages are intended for short-term rental businesses, which rent the home to temporary guests.
This scenario is different from having long-term tenants on an assured tenancy agreement, so you'll need to ensure you apply for the correct type of buy to holiday let mortgage.
What are the Best Rates on a Holiday Let Mortgage Calculator?
Buy to holiday let mortgage rates vary and won't be comparable to residential averages. The market is reasonably specialist, so most high street banks will not offer this type of product.
Rates on buy to holiday let mortgages depend on:
- How much deposit you have available.
- The anticipated rental income.
- Your credit rating
- Other income.
- Your age.
- What type of property it is.
You can get interest-only buy to holiday let mortgages, which in some cases may be preferable.
How Do I Know Which Are the Best Holiday Let Mortgages?
Second homes and holiday let investments are increasingly popular, so we're seeing these types of buy to holiday let mortgage products crop up more and more in the mainstream lending market.
The problem is that it's all but impossible to know with any certainty, which are the best buy to holiday let mortgage deals, and which are lenders are most suitable for your application circumstances.
A high street bank may not be as competitive as a niche lender in most cases. Still, they might be more likely to approve your application if you are a pre-existing customer and tick all of the eligibility boxes, including having a healthy deposit.
However, if you're keen to minimise the costs of your buy to holiday let mortgage and be confident that you're not paying over the odds, the only option is to use an experienced holiday let broker.
The Revolution Brokers team compares thousands of buy to holiday let mortgage products across a nationwide network of lenders, including like-for-like comparisons to consider additional costs and 'hidden' application fees rolled up in the interest payments.
How Does My Deposit Impact Rates Available on Holiday Let Mortgages?
Lenders will typically need a deposit of 25% for a holiday home rental and at least 15% if you will be living in residence some of the time.
If you have a lower deposit, the buy to holiday let mortgage lender is being asked to accept a higher risk. So it would be best if you worked with an experienced broker who can signpost your application to mortgage providers who may offer flexibility.
Other risk factors can also drive up the deposit requirement, so the more effective the security you can offer, the lower your rates will be on a low deposit application.
Is There a Maximum Value on Buy to Holiday Let Mortgages?
The main limiting factor on buy to holiday let mortgages is how much rental income it will generate. Mortgages are arranged similarly to a buy to let mortgage, assessing the average rental to arrive at an annual average.
For example, if you pay £500 a month towards the holiday let mortgage, your income will need to be at least 125% of the annual interest - so at least £625 a month on average.
That maximum can increase depending on the property and your income tax band so that it might be up to 170% of the interest charges.
Potential income depends on the occupancy rate, the property's desirability and location, so the more in demand the rental, the higher the earnings and the more flexible the mortgage terms.
What are the Lending Criteria for Holiday Let Mortgages in Northern Ireland and Scotland?
Buy to holiday let mortgage lending in Northern Ireland and Scotland can be slightly different from other parts of the UK.
The main differences are that some lenders don't cover these regions, and sometimes postcode restrictions exist.
Revolution Brokers organises finance nationwide, so if you're trying to find a competitive buy to holiday let mortgage anywhere in the UK, please do give us a call.
Can I Get a Buy to Holiday Let Mortgages UK Through a Limited Company?
What Tax is Payable on Holiday Let Mortgages UK?
Many investors decided to purchase rental properties due to tax allowances and advantages, which have since been removed with new rules and regulations around how rental income is declared.
However, there are still plenty of opportunities to earn healthy returns with a buy to holiday let mortgage.
Also, many furnished holiday let properties are not impacted by the changes to tax regimes, as they are a different type of business investment than a regular rental.
There are several conditions to be eligible for preferential tax treatment, such as letting the property for at least 105 days a year and making it available to rent for at least 210.
It's also wise to seek independent advice before investing in a new holiday let. You'll need to know about things like average occupancy levels, maintenance costs, service charges, rental income and overall what profit you stand to make after you've factored in your buy to holiday let mortgage interest charges.
How Can a Holiday Let Mortgage Broker Help?
As a whole-of-market broker, Our mortgage brokers team can help drive down your buy to holiday let mortgage costs and ensure you apply to a suitable lender who will be in a great position to approve your application.
We have access to all the lenders and buy to holiday let mortgage products on the market, matching you with exclusive deals that you won't find on any price comparison site.
Remember that banks can only sell mortgage products on their books and buy to holiday let mortgage products are somewhat of a niche, so you can save a considerable amount of money in your mortgage interest by working with an independent industry expert.
Can I Get a Mortgage Without a Holiday Let Mortgage Broker?
If you don't have any non-standard circumstances, you can certainly find reasonably competitive buy to holiday let mortgage offers online or through your banking provider.
The issue here is that some of the most advantageous buy to holiday let mortgage deals are through niche lenders specialising in the holiday property sector, many of whom don't offer the lowest interest rates on the open market.
Another complication is that you'll need to conduct thorough eligibility research before applying for a buy to holiday let mortgage.
Lenders can reject a buy to holiday let mortgage application for countless reasons, so it's important to be sure you will gain approval to avoid racking up credit searches and perhaps making it more difficult to get a great deal elsewhere.
Is a Holiday Let Mortgage Calculator Reliable?
Online mortgage calculators are a great resource, but they're also highly limited.
Most online comparison sites operate on a paid-for basis, so they aren't a true reflection of the best buy to holiday let mortgage deals on the market - just the best deals from lenders that have paid to advertise there.
Calculators give you a rough idea about things like how much you can borrow, your monthly repayment costs and the interest rates you'll be quoted.
Still, these are very generic and may change considerably when you apply.
We'd advise using a buy to holiday let mortgage calculator only as an informational guide and contacting the Revolution Brokers team for more accurate indications of what you're likely to be offered.
How Can I Find the Best Holiday Let Mortgages?
There are thousands of buy to holiday let mortgage lenders out there with holiday let products, ranging from banks and building societies to niche providers and specialist mortgage companies.
If you're looking for the best holiday let mortgages and a tailored application that will enhance your likelihood of success, the right solution is to consult a skilled broker.
Our buy to holiday let mortgage consultants negotiate on your behalf and can construct bespoke mortgage arrangements to fit around your needs, ensuring you get the most beneficial deal available.
Expert Advice Finding a Buy to Holiday Let Mortgage
Should you be interested in learning more about holiday let mortgages, please contact the Revolution Brokers team at [email protected].
Alternatively, you can call us on 0330 304 3040.
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As specialist mortgage brokers for a huge variety of applicants, the whole-of-market consultants at Revolution provide access to an exceptional range of lenders, products and mortgage deals. That means you get the advantage of professional negotiation and broker-exclusives through an established lending network to ensure we always find you the most competitive mortgage available.
The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.
We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.