Our expert team can assist you in finding the perfect Mortgage. We conduct a whole of market search to match you with the perfect lender.
Holiday let mortgages
Are you looking to own a home by the beach? Or in your favourite spot in the UK? Or you’re looking for an investment opportunity. A holiday let mortgage could help you achieve these and boost your income and has tax benefits.
What is a holiday let mortgage?
A holiday let is different from a holiday home mortgage which is a second home that only you will use.
A holiday let is for people looking to borrow money to buy a property that will be let out on a short-term basis to tourists as a business.
It’s also very different from a buy to let as the purpose is to let out the property on a long-term basis.
Let’s discuss your mortgage options!
What is the criteria for holiday let?
The criteria required for a holiday let is a little tighter than with a residential buy to let for example. A lender will assess a couple of things when considering lending, they will look at your personal income, expected income from the property, your outgoings etc. If you already have a mortgage this can impact the amount, you’re able to borrow for a holiday let. The lender will assess the risk for them and if they see a mortgage, they will need to make sure you’re able to afford the repayments during the periods the property is not being let.
How much can I borrow?
For a holiday let, you’ll typically need a deposit of 25%-30%, this is due to the fact that there is more risk for the lender of a holiday let compared to a conventional mortgage or buy to let. The lender will also look into whether the property can provide a rental income of 125%-145% of the interest payable on the mortgage. You will also be required to show you can keep up with the payments during the periods the property is not let.
What are the tax benefits?
One of the biggest factors people opt to go for a holiday let mortgage is due to the way it’s beneficial with tax. If the property is fully furnished it is classed as a business which means you are able to deduct all expenses from the rental income before your tax assessment. This includes interest you are paying on the mortgage. In comparison to the tax relief on buy to let properties which is in the process of changing and becoming less beneficial.
What costs are involved in a holiday let?
There is no getting away from interest rates and on holiday let’s is slightly higher than on a conventional mortgage, the rates vary from 2%-4% depending on the deposit side you put down. But as explained in the previous section, you’ll be able to offset your mortgage interest against your rental income for tax purposes. Get in touch with Pinnacle today and speak to our expert specialist team who are able to help you discover the best options for you on the market.