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BTL Mortgages for Holiday-Lets

Are you planning to buy a new holiday-let property or refinance your existing BTL property? You can speak to a specialist mortgage adviser to find a suitable lender. Specialist mortgage advisers handle both the purchases and re-mortgages of your holiday-let properties. If you are a portfolio landlord, you can consider expanding your portfolios towards holiday-let properties.

Specialist mortgage advisers have studied the relevant lending criteria on holiday-let properties. Not all High-street lenders would not consider a mortgage for holiday-let properties due to its high risk and short-term letting purposes. It has made the opportunity for specialist lenders to enter the space with attractive deals to potential short-term let landlords.

Examples for basic Holiday-Let Mortgage criteria,

  • Some lenders consider the UK and channel islands whereas other lenders only consider limited postcodes
  • Specialist BTL lenders offer loan amounts up to 75% of the property value
  • Most lenders would review the previous landlord experience

Most lenders would have a cap on the minimum property value. You could speak to a mortgage adviser on the expected purchase price as if there is any restriction, then it could be addressed well in advance. In terms of the deposit, if you have a good credit score, you would require a minimum of 25% deposit to apply for a holiday-let mortgage in the UK.

The mortgage term is dependent on your age and most lenders would allow a mortgage term of 25 years. In terms of the property, leasehold properties should have a minimum of 85 years left on the lease at the start of the mortgage and 50 years on maturity. Again, these are standard criteria, and mortgage advisers would help you with specific requirements!

How to plan the holiday-let property investment?

Holiday-let investments are considered self-funding property investments. The rental income would cover the monthly interest-only mortgage payment. You can use the “sale of mortgaged property” as the main capital repayment vehicle. Property investors are potentially looking at two main types of gains.

  • Year on year gain on the profit made on rental income (rental income minus mortgage interest and another cost of maintenance)
  • House price appreciation

You should consider whether you can manage the cost of any major repairs as well as ongoing minor repairs and maintenance. It is important to seek mortgage advice before entering into any property-related transaction.

Apart from an experienced mortgage adviser, you would require the help of a qualified solicitor to handle the paperwork and legal tasks associated with holiday-let properties. Further, a qualified accountant would be required to manage the tax returns and other expenses to claim tax allowances.

How to find a suitable holiday-let property?

You would require to conduct proper market research. You should obtain the help of estate and lettings agents, who will be able to advise on demand and prices in the area. The location of a holiday let property will impact its rental value. You should also consider the traveling distance from your residential home to the holiday-let property. Then, it would be easy to manage the property.

Speak to an experienced mortgage adviser

Speak to an experienced mortgage adviser or estate agent and make sure you have a professional opinion of the level of income and potential occupancy levels you can expect from the property and the area. Further, you should research the potential for an increase in house valuation in five years’ time. If you are planning to do any refurbishment, how it would affect the property value. For example, if the property value goes up with extra work, you would be able to apply for a cheaper interest rate in the lower loan to value bracket.

Assess the safety level of the property

It is compulsory to meet the letting regulations to rent out a property. For example, furniture and furnishings fire safety, gas safety, electrical equipment safety, and that it contains a smoke detector. Most lenders would require an energy certificate to assess the energy rating. It is important to note that some lenders offer better deals for properties with energy ratings from A-C. You could benefit from the offers if the holiday-let property is safe and eco-friendly.

Always monitor the changes in the property and mortgage market

The mortgage and property market is dynamic and changing at a rapid pace due to the Covid-19 pandemic and other related matters. It has forced the lenders to make changes to their product portfolio with little or no notice at all! Therefore, it is important the holiday-let property buyers stay in touch with the mortgage adviser to time their application and apply for a suitable rate.

Tax implications

Homebuyers need to pay stamp duty land tax, which they have to pay when purchasing a Holiday Let property. It would be subject to additional property stamp duty if you are existing property owners. Rental income from the holiday-let property would be subject to income tax.

How to advertise the holiday-let property online? 

You can choose to market the property by themselves or obtain the services of an estate agent. There are online platforms to update the property letting information and attract potential tenants. You could further clarify the tenant profile types and the mortgage adviser and the lender would also be interested to know it.

In conclusion, you could gain a key benefit by having a mortgage adviser on your side when planning to buy a holiday-let property. They would help the buyers with cost-effective strategies in terms of both the cost of debt finance and tax implications. Further, landlords who are planning to build a portfolio of BTL properties could benefit in the long run with specialist mortgage advice.

As a mortgage is secured against your home, it could be repossessed if you do not keep up with the mortgage repayments.

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Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of our Independent Mortgage Brokers to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisers working for or with Independent Mortgage Brokers are fully qualified to provide mortgage advice and authorised and regulated by the Financial Conduct Authority. All our independent Mortgage Brokers will offer advice specific to you and your needs and circumstances. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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