Frequently Asked Holiday Let Ownership Questions

Helping you buy the house or holiday
home you really want.

Frequently Asked Holiday Let Ownership Questions

Yes, holiday let owners frequently use Airbnb as their mode of letting a holiday property to customers. Some lenders however are reluctant to accept this platform and if you need to borrow money to buy a holiday let property then it is always a good idea to check with your broker or adviser that the proposed lender is happy for you to use Airbnb.

A holiday let, unless a static caravan, will attract stamp duty. The rate at which a purchaser pays stamp duty will depend on the rules and rates at the time of purchase. Second homes will attract an additional surcharge even if they are not let out. With a much lower starting threshold of £40,000, most second home purchases now attract an additional 3% stamp duty tax.

We always suggest customers buy a holiday let property with their head and not their heart. Just because you like a town or an area does not mean all your potential customers will. For example, you may love peace and quiet, but the majority of your customers may want to be close to amenities and nightlife. This is somewhat different if you want to maximise your time there, using the property as a holiday home. Then personal favoured locations are a major buying factor.  We say always do your research and seek the opinions of the holiday letting agents in the area you are keen on. They should know what rents well and what is harder to let out.

How much you can borrow is really determined by the weekly rental typically averaged out over a 30-week period. Most of the time we will be asking a bona fide holiday agent to give the lender a written account of the rental predictions over a 10-week low holiday season, 10-week medium season and 10-week high season. This figure is then averaged out and multiplied by 30 weeks. We can then determine to what level of borrowing you can go to. Lenders will normally look to lend a maximum of 75% of the properties current value, so you’ll need a 25% deposit. The third factor which will influence how much you can borrow is what you and/or your partner earn sperate to your projected holiday let income. This will determine which lenders will and will not assist you depending on their written criteria but as a rule most lenders want a couple to be earning £30K a year away from the holiday let. This will vary so seek the help of an expert.

Yes, very much so. You will need to discuss each proposed purchase with your specialist mortgage adviser, but properties need to generally in good order, without restrictions. A typical example restrictions placed on properties is that  they can be only sold to holiday customers, if there are flying freeholds, annexes or another dwelling in the garden, if they are attached to the local tea room or on a holiday park. These all play a part in lenders deciding whether they want to lend on that property and the chances of getting a loan on such homes will diminish to zero in some examples. Please speak with your adviser for further explanation.

Provided the lease is of sufficient length, i.e. normally over 85 years, and your solicitor and building surveyor have made the necessary due diligence checks, then all should usually be in order and you’ll be able to get a holiday let mortgage on a leasehold property.  It’s always worth checking that the freeholder is happy for you to let the property out.

Ones man’s light refurbishment is some wallpapering and painting but to another man, it is pulling walls down. As a rule of thumb holiday lenders like their security to be lettable from day one. So, if you are buying a “doer upper” then you will definitely need to speak to a qualified mortgage broker who has the right access routes to bridging and short term finance with a few to eventually getting a holiday let mortgage to repay the short term finance borrowed to bring the property to the standard required.

Yes, but you may find your existing buy to let lender does not lend on holiday lets so will have to find a lender that has a holiday let portfolio of mortgage products. Your financial circumstances, the rental income to be generated by the property and the property itself will then need to be accepted by the holiday let lender. We strongly advice you seek the help of a mortgage broker or adviser who is familiar with holiday let lending.

This is a complex area that cannot be answered on a ‘one size fits all’ basis. As with many complex matters there are pros and cons to putting property(s) into company ownership. One probably thinks about it with the aim of paying less tax but there are factors such as which holiday let lender will do a ltd company let?

 

Answer: very few currently!

 

So, you may be disadvantaging yourself from taking a keener priced product or not being able to borrow at all on that property because you have chosen the wrong route.

 

At the time of writing this (August 2020) holiday let borrowers get tax relief on interest payments unlike buy to let borrowers. So, you will need to get a specialist tax adviser to explain what advantages you are actually gaining.                  

 

The solution is simple; we urge all holiday borrower to seek specialist advice from their accountant or tax adviser. We strongly urge that they have full holiday let knowledge.  

 

Whatever you decide to do, it’s worth speaking both to a specialist tax adviser and an independent mortgage broker who will assess your personal situation and advise on the best approach for you.

Here are some suggestions:

 

  1. You will need a specialist mortgage adviser to help you source a suitable holiday let mortgage
  2. You will want the services of an excellent holiday letting agent to look your bookings and market your property
  3. They may well provide you a cleaning service and maintenance persons. You cannot drive 100 miles every Saturday to do the changeover!
  4. You’d be advised to source a good solicitor and building surveyor to be your eyes and ears during the purchase
  5. You ought to consider a top accountant with an understanding of holiday let tax and relief rules.

If you are marketing the property yourself, you will need a suitable website.

Stamp Duty

Government tax payable when you complete your purchase. The amount payable is based on the purchase price. For the latest rates please see the HMRC website by clicking here.

FAQ’s
FAQ’s
Solicitors Fees
This amount will vary from case to case but for a single purchase typical legal fees including disbursements may be around £700 – £1000.
Stamp Duty

Government tax payable when you complete your purchase. The amount payable is based on the purchase price. For the latest rates please see the HMRC website by clicking here.

FAQ’s

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home you really want.

Specialising in Mortgages for Holiday Homes

Talk to our experts for everything you need to know about buying your holiday home, holiday let or Air B&B

Your home may be repossessed if you do not keep up
repayments on your mortgage.

There will be a fee for the advice given, the exact amount will depend upon your circumstances but we estimate it we be £250 for residential cases.
Specialist, complex and sub-prime cases may attract a higher fee which will be typically no more than £495. Equity release cases will command a £695 fee.

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