Holiday Let Mortgage Broker
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Mark Stallard, Director, and Adviser of House and Holiday Home Mortgages explains the role of a Holiday Let Mortgage Broker.
What’s the role of a holiday let Mortgage Broker?
A standard Mortgage Broker can help you buy a home. Whether you’re a First Time Buyer, mover, buying to let or you want to remortgage, they will advise you on the most appropriate mortgage deals.
We do all that too, but we’ve added a big speciality – holiday let mortgages, as these are slightly different. In our experience, people who don’t seek specialist support can unwittingly trip themselves up.
Why talk to a broker rather than a high street bank?
It’s important to go to a broker because mortgaging is a specialist world – and for holiday lets many banks and building societies can’t help. People come to us because we know the lenders and how to get a mortgage that meets your needs.
Which lenders offer holiday let mortgages?
Generally, the lenders in this area are smaller residential building societies or specialist banks. At the moment there are probably 14 or 15 in this space, of which 7 or 8 are lending. And it wouldn’t be surprising for a customer not to have heard of the providers we suggest.
Can a Mortgage Broker get a better deal?
I have a chart on my desktop which is updated by the minute to keep track of all the top-performing deals. Lenders dip in and out of this space – maybe they’re too busy, maybe they haven’t got the money they need to lend. So new deals come and go on a daily basis – we are always up to date on what’s happening in the market.
What services does a Mortgage Broker offer?
For holiday let mortgages, our services are about criteria more than rates. On my chart, the rates are similar across the board, whether the deal is a two year fixed mortgage or a five year fixed deal. What differs is the criteria that each lender applies to their potential customers.
Typical questions from a lender might be: “Has the client got an existing mortgage?” “Does the client have an income?” “Is the property going to have an annex?” “Are they using Airbnb?”
The client’s answers will help define which mortgages we can go for.
Can a Mortgage Broker help throughout the purchase process?
Yes – we’re on hand throughout the whole mortgage process as a support for the client – holding their hand at every step and acting on their behalf.
A recent example involves a couple who were buying a property in a nice part of Cornwall. I had found a lender that would help. I was a bit concerned about the property though, so I called a couple of local holiday letting agents. They felt the property wasn’t of good enough quality to let. I told the customers about this and they chose not to proceed with the purchase. If you can’t let the property out, it’s not going to achieve your goals.
How does a holiday let mortgage work?
Most people know that with a Buy to Let mortgage, you need to understand how much rent the property will generate over six months to a year.
In the holiday space, it’s slightly different, because we’re looking at weekly figures. Letting is seasonal, so we’re looking at 24, 26, or 30 weeks of the year. We need to work out an average figure to inform the letting rates.
It’s normally much higher than a Buy to Let. Instead of say £1000 a month on a residential let, with a holiday home in Cornwall, Devon, the Cotswolds, or the Lake District, you could make £2,000 a week.
The second big difference is that a Buy to Let lender will not necessarily lend on a holiday let. Some clients apply to these lenders only to be rejected three weeks later.
What’s the difference between a holiday home and a holiday let when it comes to mortgages?
A holiday let is a commercial investment – a property you’re letting to customers that you can use yourself for a certain number of weeks in the year.
A holiday home is a property that you own yourself, where you plan to spend a lot of time – over the summer, over Christmas, over Easter… Because you’re not using the home for commercial purposes and are borrowing, say, £200,000 pounds to buy it, the challenge is to prove that it’s affordable alongside your main residential mortgage and all your other bills, etc.
How much deposit do I need for a holiday let mortgage?
The starting point for a holiday let mortgage is 20%, but 25% is more common. If you can put in 40% you’ll get a better interest rate.
How much does it cost to run a holiday let?
Let’s start with stamp duty, which is at a premium as this is a second home – although there is some relief on stamp duty until the end of June 2021. Use the calculator on our website [add link], put in the purchase price of the property (including that it’s an extra property) and it will tell you what stamp duty is required now and once the stamp duty holiday finishes.
Other costs include the normal buying and selling legal costs, which you can check with a solicitor. And then there are the ongoing costs such as agents fees, which can be around 20%. You will probably need a weekly cleaner – one client has recently been quoted £200 a week for cleaning. That’s not the same everywhere, so make sure you shop around.
Is buying a holiday let a good investment?
As we all know property prices can fall – but obviously all the evidence suggests a steady increase in the value of a property. But every property is different. Every area is different.
Of course, at the moment holiday lets are big business, because of the ‘staycation’ trend. But this is just a snapshot in time, and it’s hard to know what the future will bring.
How do you go about choosing a Mortgage Broker?
The best place to start is a recommendation – take a look at social media, Facebook, Google, and website testimonials. The testimonials on our site are 100% genuine, from customers who have been happy with what we do.
At what stage should you contact a Mortgage Broker?
Most people find us after they’ve put an offer in on a property, which I understand.
If I go and buy a sofa, I don’t worry about how I’m going to pay for it. But I’d rather people phoned us earlier and build up a relationship with us – to check that they like us, that we return calls, that they feel good about working with us. That way they can get an understanding of the type of mortgage they want, the type of mortgage installments to expect, and the traps to avoid.
For example, lenders want properties that are in great condition. It’s not the same as when you buy a home to live in and can slowly make improvements – it needs to be perfect for a holiday customer from day one.
When a customer first contacts us we’ll explain our services and be clear about how it works, what our fee would be and when that fee is payable. So there are no surprises for anybody. Just get in touch and we’ll get things moving.