How to finance a holiday home (part 2)?
Discussion
Mods, wasn't sure of the etiquette of hijacking the other similarly named thread, so ive started this one, sorry.
Identical to the other poster in terms of desiring a holiday home, I would like to do the same. However, I'm completely out of my depth when it comes to finance. Family members have said I would be mad to get a 2nd mortgage.
This is my situation
Age 38 (same as wife), two kids 3&4
I'm full time, missus is 3 days per week until kids go to school full time (September 2017)
My House value is £650k, mortgage currently stands £185k
Looking to buy a flat in the region of 85k - 100k.
5k savings
So, is it pie in the sky, or is it a reasonable ambition?
Again, go easy as this is not my 'forte'!
Identical to the other poster in terms of desiring a holiday home, I would like to do the same. However, I'm completely out of my depth when it comes to finance. Family members have said I would be mad to get a 2nd mortgage.
This is my situation
Age 38 (same as wife), two kids 3&4
I'm full time, missus is 3 days per week until kids go to school full time (September 2017)
My House value is £650k, mortgage currently stands £185k
Looking to buy a flat in the region of 85k - 100k.
5k savings
So, is it pie in the sky, or is it a reasonable ambition?
Again, go easy as this is not my 'forte'!
Sounds very similar to us, we are 6 years older (kids incl) but it works for us. Assuming you can afford 2nd mortgage. Ours in in France and we got a french mortgage on it , the cost of flat and cheap travel works out the same as 1 big & 1 small holiday each year, this year we used ours for 9 weeks
I'm in a similar boat. A bit older but thinking about a holiday home abroad somewhere sunny. I've had a brief look at financing options and it seems to boil down to
1) Cash, nice if you have it, not many will. I have enough for a decent deposit but not enough for the whole amount so will need to borrow some.
2) Get a mortgage locally in the country you wish to purchase the property. Easier said then done, you will have no credit rating\financial history in that country which means you either won't be able to get one at all or if you do, they will bum-rape you on the interest rate. A lot of the warmer places we want to buy also aren't as financially stable as the UK or regulated to the same degree making this a bit of a risky proposition.
3) Unsecured loan - only really available up to about £30k which is fine if that's all you need but it usually won't be enough.
4) You can get specialist mortgages in this country for overseas\second holiday homes. Pro's are the second home is mortgaged on it's own meaning your main residence is not at risk. Cons are that interest rates seem to be on the high side, I am seeing 5-6% which is way above normal lending rates here.
5) Extend your current mortgage or re-mortgage your existing house. If you have decent equity in your main home, this is probably the safest and cheapest option as you already have credit history in this country and interest rates are pretty cheap here. Plus it will be easier to setup, especially if you are just borrowing extra money on your current mortgage. The downsides are obviously that you'll need to make sure you have enough to cover the new increased mortgage or you risk loosing both homes plus you will want to consider things like interest rate rises, loss of job\earnings etc VERY carefully.
For what it's worth we will be probably be going with option 5. Yes some people might consider it a bit risky but it's something we've wanted to do for a while, it will mean we can take longer holidays and be more flexible about when we go etc and at the end of the day it's an asset so if things go badly financially we can always sell or rent it.
1) Cash, nice if you have it, not many will. I have enough for a decent deposit but not enough for the whole amount so will need to borrow some.
2) Get a mortgage locally in the country you wish to purchase the property. Easier said then done, you will have no credit rating\financial history in that country which means you either won't be able to get one at all or if you do, they will bum-rape you on the interest rate. A lot of the warmer places we want to buy also aren't as financially stable as the UK or regulated to the same degree making this a bit of a risky proposition.
3) Unsecured loan - only really available up to about £30k which is fine if that's all you need but it usually won't be enough.
4) You can get specialist mortgages in this country for overseas\second holiday homes. Pro's are the second home is mortgaged on it's own meaning your main residence is not at risk. Cons are that interest rates seem to be on the high side, I am seeing 5-6% which is way above normal lending rates here.
5) Extend your current mortgage or re-mortgage your existing house. If you have decent equity in your main home, this is probably the safest and cheapest option as you already have credit history in this country and interest rates are pretty cheap here. Plus it will be easier to setup, especially if you are just borrowing extra money on your current mortgage. The downsides are obviously that you'll need to make sure you have enough to cover the new increased mortgage or you risk loosing both homes plus you will want to consider things like interest rate rises, loss of job\earnings etc VERY carefully.
For what it's worth we will be probably be going with option 5. Yes some people might consider it a bit risky but it's something we've wanted to do for a while, it will mean we can take longer holidays and be more flexible about when we go etc and at the end of the day it's an asset so if things go badly financially we can always sell or rent it.
Been there, done the calculations, watched the trend of property in sunnier climes not really appreciating, and often depreciating.
Worked out how many holidays I can have for the price of the holiday home.
Decided it really wasn't worth the effort. Especially as it really does tie you to going to the same place year after year after year, until you become one of the varnished old ex-pats with nothing to do other than sit around eating English food and drinking cheap beer until you die.
Worked out how many holidays I can have for the price of the holiday home.
Decided it really wasn't worth the effort. Especially as it really does tie you to going to the same place year after year after year, until you become one of the varnished old ex-pats with nothing to do other than sit around eating English food and drinking cheap beer until you die.
Dr Murdoch said:
Mods, wasn't sure of the etiquette of hijacking the other similarly named thread, so ive started this one, sorry.
Identical to the other poster in terms of desiring a holiday home, I would like to do the same. However, I'm completely out of my depth when it comes to finance. Family members have said I would be mad to get a 2nd mortgage.
This is my situation
Age 38 (same as wife), two kids 3&4
I'm full time, missus is 3 days per week until kids go to school full time (September 2017)
My House value is £650k, mortgage currently stands £185k
Looking to buy a flat in the region of 85k - 100k.
5k savings
So, is it pie in the sky, or is it a reasonable ambition?
Again, go easy as this is not my 'forte'!
I guess you could easily add a further mortgage on your current house to get the capital to buy/put down a deposit on a 2nd home. Depends how much spare money you've got at the end of the month to cover the additional borrowing. Personally I'd want a fair bit more than £5k savings before committing to a luxury like a holiday home, but I'm a much more cautious individual than some!Identical to the other poster in terms of desiring a holiday home, I would like to do the same. However, I'm completely out of my depth when it comes to finance. Family members have said I would be mad to get a 2nd mortgage.
This is my situation
Age 38 (same as wife), two kids 3&4
I'm full time, missus is 3 days per week until kids go to school full time (September 2017)
My House value is £650k, mortgage currently stands £185k
Looking to buy a flat in the region of 85k - 100k.
5k savings
So, is it pie in the sky, or is it a reasonable ambition?
Again, go easy as this is not my 'forte'!
Guvernator said:
I'm in a similar boat. A bit older but thinking about a holiday home abroad somewhere sunny. I've had a brief look at financing options and it seems to boil down to
1) Cash, nice if you have it, not many will. I have enough for a decent deposit but not enough for the whole amount so will need to borrow some.
2) Get a mortgage locally in the country you wish to purchase the property. Easier said then done, you will have no credit rating\financial history in that country which means you either won't be able to get one at all or if you do, they will bum-rape you on the interest rate. A lot of the warmer places we want to buy also aren't as financially stable as the UK or regulated to the same degree making this a bit of a risky proposition.
3) Unsecured loan - only really available up to about £30k which is fine if that's all you need but it usually won't be enough.
4) You can get specialist mortgages in this country for overseas\second holiday homes. Pro's are the second home is mortgaged on it's own meaning your main residence is not at risk. Cons are that interest rates seem to be on the high side, I am seeing 5-6% which is way above normal lending rates here.
5) Extend your current mortgage or re-mortgage your existing house. If you have decent equity in your main home, this is probably the safest and cheapest option as you already have credit history in this country and interest rates are pretty cheap here. Plus it will be easier to setup, especially if you are just borrowing extra money on your current mortgage. The downsides are obviously that you'll need to make sure you have enough to cover the new increased mortgage or you risk loosing both homes plus you will want to consider things like interest rate rises, loss of job\earnings etc VERY carefully.
For what it's worth we will be probably be going with option 5. Yes some people might consider it a bit risky but it's something we've wanted to do for a while, it will mean we can take longer holidays and be more flexible about when we go etc and at the end of the day it's an asset so if things go badly financially we can always sell or rent it.
Don't assume that, we have approx £500,000 equity in our UK house and only wanted to borrow £85K to put towards our £40K deposit, my UK bank was not keen to lend & our current U K mortgage is 1x joint salary. We thought that was it, the someone suggested BNP Paribas, they have a whole team dedicated to U K buyers, it was so simple , better rates than UK bank & that's the way I would go again1) Cash, nice if you have it, not many will. I have enough for a decent deposit but not enough for the whole amount so will need to borrow some.
2) Get a mortgage locally in the country you wish to purchase the property. Easier said then done, you will have no credit rating\financial history in that country which means you either won't be able to get one at all or if you do, they will bum-rape you on the interest rate. A lot of the warmer places we want to buy also aren't as financially stable as the UK or regulated to the same degree making this a bit of a risky proposition.
3) Unsecured loan - only really available up to about £30k which is fine if that's all you need but it usually won't be enough.
4) You can get specialist mortgages in this country for overseas\second holiday homes. Pro's are the second home is mortgaged on it's own meaning your main residence is not at risk. Cons are that interest rates seem to be on the high side, I am seeing 5-6% which is way above normal lending rates here.
5) Extend your current mortgage or re-mortgage your existing house. If you have decent equity in your main home, this is probably the safest and cheapest option as you already have credit history in this country and interest rates are pretty cheap here. Plus it will be easier to setup, especially if you are just borrowing extra money on your current mortgage. The downsides are obviously that you'll need to make sure you have enough to cover the new increased mortgage or you risk loosing both homes plus you will want to consider things like interest rate rises, loss of job\earnings etc VERY carefully.
For what it's worth we will be probably be going with option 5. Yes some people might consider it a bit risky but it's something we've wanted to do for a while, it will mean we can take longer holidays and be more flexible about when we go etc and at the end of the day it's an asset so if things go badly financially we can always sell or rent it.
Trabi601 said:
Decided it really wasn't worth the effort. Especially as it really does tie you to going to the same place year after year after year, until you become one of the varnished old ex-pats with nothing to do other than sit around eating English food and drinking cheap beer until you die.
Haha yes quite.But then if you can rent the place for 3 months at a grand sterling a week in Summer then that 12k is quite a decent chunk of money.
Broccers said:
Trabi601 said:
Decided it really wasn't worth the effort. Especially as it really does tie you to going to the same place year after year after year, until you become one of the varnished old ex-pats with nothing to do other than sit around eating English food and drinking cheap beer until you die.
Haha yes quite.But then if you can rent the place for 3 months at a grand sterling a week in Summer then that 12k is quite a decent chunk of money.
I'd probably buy a holiday home if I had huge amounts of cash in the bank, but with minimal reserves and needing a fairly chunky mortgage to do it, I just cannot see how it can make any sense at all.
jonny996 said:
Don't assume that, we have approx £500,000 equity in our UK house and only wanted to borrow £85K to put towards our £40K deposit, my UK bank was not keen to lend & our current U K mortgage is 1x joint salary. We thought that was it, the someone suggested BNP Paribas, they have a whole team dedicated to U K buyers, it was so simple , better rates than UK bank & that's the way I would go again
Just checked their website and they seem to mention a minimum borrowing amount of 100000 Euro's, we don't need that much. Also their is no mention of interest rates but the examples they give seem quite a bit higher than what I'm on.Dr Murdoch said:
Thanks everyone
The flat (could be house) will be on the Isle of Wight, not exactly a place in the sun, but lots of things for the kids to do as they grow up. Once its done its job, i would look to sell and use the money as a pension top up.
HiThe flat (could be house) will be on the Isle of Wight, not exactly a place in the sun, but lots of things for the kids to do as they grow up. Once its done its job, i would look to sell and use the money as a pension top up.
Just be careful where you buy on the island. There are some lovely places but many wont give a great return. Popular holiday areas are quite run down.... I suspect you already know this though...
We have lived in Ryde for 16 years and love living and working here. If you fancy a chat about the island give me a pm....
Dr Murdoch said:
I'm completely out of my depth when it comes to finance. Family members have said I would be mad to get a 2nd mortgage.
Questions to ask yourself include,- Why buying a second home is a good idea before you've finished paying for the first one?
- Why buying a second home is a good idea when George Osborne has just substantially increased the taxes on them?
- Why buying more residential property is a good idea rather than investing in something else? - it's a lot of eggs in the same basket.
- Why "borrowing to invest" is a good idea at all?
- Why buying a taxed second home is better then investing in tax-free ISA or pension?
Ozzie Osmond said:
Dr Murdoch said:
I'm completely out of my depth when it comes to finance. Family members have said I would be mad to get a 2nd mortgage.
Questions to ask yourself include,- Why buying a second home is a good idea before you've finished paying for the first one?
- Why buying a second home is a good idea when George Osborne has just substantially increased the taxes on them?
- Why buying more residential property is a good idea rather than investing in something else? - it's a lot of eggs in the same basket.
- Why "borrowing to invest" is a good idea at all?
- Why buying a taxed second home is better then investing in tax-free ISA or pension?
sideways sid said:
Ozzie, may I steer you towards the original post at the top of the page where you will see the answers to most of your questions. The OP has equity in his main home and is looking to buy a holiday home, to enjoy holidays, not to make an investment return. Although your caution on eggs in baskets is wise for the OP to consider.
So essentially borrowing lots of money, over a long term, taking on a lot of hassle, to have a few holidays on a crappy little island off the coast of Hampshire?£100k buys a lot of holidays in much nicer places, and you can get to go somewhere different every year. If you buy a holiday home, you'll always feel you need to go there to justify its existence.
(I had cash available which could have bought a holiday home - but I, instead, bought a rentable house which now generates more than enough money to pay for very nice holidays elsewhere)
Not sure about the OP but my reasoning was
1) I was going to get a BTL here but prices in this country are currently through the roof and the government seems to have a real hard-on against BTL'ers which is only likely to get worse.
2) By buying abroad I get to dip my toe in to the investment property market at a lot lower buy in point, £80-100k gets you A LOT of house abroad, you couldn't buy a garage near London for that.
3) Hopefully it will appreciate so I can sell it later if I get desperate for cash. I am looking at something which can be used all year round not just a summer house which should make appreciation more likely.
4) If I don't need to sell it, I can retire there one day and even leave it to the kids when I clock off. Right now property is cheap-ish in the areas I am looking at but going up all the time, if I leave it another 5-10 years I probably won't be able to afford it.
5) I can go whenever I like or use it as a base to explore surrounding areas\countries etc. When you have kids it's nice to have a home away from home as a base rather than rely on temporary accommodation all the time.
6) The kids and the OH can spend all summer there for the same\less as spending 10 days in a decent hotel. Hopefully if things go well my work will become more flexible meaning I can also join them.
7) We go to that country at least twice a year anyway as we have family there so it makes sense for us to have a base there.
As you can see personal circumstances will make something attractive or not so blanket-ly stating that it shouldn't be done is wrong. Many people have second homes elsewhere for many reasons and they are happy or they wouldn't do it.
1) I was going to get a BTL here but prices in this country are currently through the roof and the government seems to have a real hard-on against BTL'ers which is only likely to get worse.
2) By buying abroad I get to dip my toe in to the investment property market at a lot lower buy in point, £80-100k gets you A LOT of house abroad, you couldn't buy a garage near London for that.
3) Hopefully it will appreciate so I can sell it later if I get desperate for cash. I am looking at something which can be used all year round not just a summer house which should make appreciation more likely.
4) If I don't need to sell it, I can retire there one day and even leave it to the kids when I clock off. Right now property is cheap-ish in the areas I am looking at but going up all the time, if I leave it another 5-10 years I probably won't be able to afford it.
5) I can go whenever I like or use it as a base to explore surrounding areas\countries etc. When you have kids it's nice to have a home away from home as a base rather than rely on temporary accommodation all the time.
6) The kids and the OH can spend all summer there for the same\less as spending 10 days in a decent hotel. Hopefully if things go well my work will become more flexible meaning I can also join them.
7) We go to that country at least twice a year anyway as we have family there so it makes sense for us to have a base there.
As you can see personal circumstances will make something attractive or not so blanket-ly stating that it shouldn't be done is wrong. Many people have second homes elsewhere for many reasons and they are happy or they wouldn't do it.
There seems to be some confusion with investment v holiday home. A holiday home will never give you a great financial return but it does give you quality family time at a cost that is affordable. Only this week my holiday home has saved me £2800 , if I did not have my own home I would have had to flown sat-sat feb mid term to go skiing at £500 per head. Having my own place allowed me to go mon-mon at £100 x 7 people. Not mentioning I don't need to pay for luggage.
If you do want to go else where, just do a house swap holiday against your holiday home.
If you do want to go else where, just do a house swap holiday against your holiday home.
Dr Murdoch said:
5k savings
So, is it pie in the sky, or is it a reasonable ambition?
Again, go easy as this is not my 'forte'!
C'mon? I don't mean to be rude or come across as snobby (I certainly can not afford a holiday home), but if you have a 185k mortgage and only have 5k savings you must be either living pay day to pay day or blowing lots of money on lavish lifestyles. Either way, you would have to drastically change your lifestyles to pay for the 100k borrowing. So, is it pie in the sky, or is it a reasonable ambition?
Again, go easy as this is not my 'forte'!
Ok, so right now with silly rates that may cost you around £400 per month, borrowed against your family home. Or if we look at historic rates, anything up to around £700 per month.
Let's say a nice easy 500 per month over the next 10 years.
Maintenance on your second home, how much? £1000 per year? How much do you pay on your current home?
Bills. Council tax, electricity, you will still need to heat it through the winter, £150 per month?
Insurance, not cheap on a holiday home say £40 per month.
So the place is costing you around 750 per month wether you use it or not.
Add in the actual buying costs which will eat into a chunk of your 5k savings.
So take out 750 quid out of your entirely disposable income each month and decide wether you will have to adapt your lifestyle in too much of a severe way. If so, it's really not worth the stress.
rufusgti said:
C'mon? I don't mean to be rude or come across as snobby (I certainly can not afford a holiday home), but if you have a 185k mortgage and only have 5k savings you must be either living pay day to pay day or blowing lots of money on lavish lifestyles.
He might be paying 10k a month off his mortgage hence the low savings. Gassing Station | Finance | Top of Page | What's New | My Stuff