Mortgage for holiday let/s

[Phooey]

I suspect mortgaging a holiday let uses a different criteria to BTLs. I'd greatly appreciate it if anyone is happy to share any advice or pointers / recommendations etc etc before I go off and spend some time Googling the internet. Ideally I could do with having a chat with someone independant or specialising (?) in this area - any recommendations?

Cheers

[Nemophilist]

Phooey said:

I suspect mortgaging a holiday let uses a different criteria to BTLs. I'd greatly appreciate it if anyone is happy to share any advice or pointers / recommendations etc etc before I go off and spend some time Googling the internet. Ideally I could do with having a chat with someone independant or specialising (?) in this area - any recommendations?

Cheers

I came on here hoping to ask the same question so I shall jump on board if that’s ok?

I’ve read up on the BTL guide on NatWest website and it doesn’t make it to clear but seems to be the same criteria

I’m just on the very early stages of considering it, but having read through some old 2017/2018 threads it makes out that it’s not the good investment it used to be unless buying for cash (which I wouldn’t be)

[Stella Tortoise]

There are lenders for this, it's much the same as BTL but the rental income can be made up of 1 week low, 1 med and 1 high averaged out and applied over 46 weeks or so.
The rent usually isn't an issue.

[JulianPH]

Phooey said:

I suspect mortgaging a holiday let uses a different criteria to BTLs. I'd greatly appreciate it if anyone is happy to share any advice or pointers / recommendations etc etc before I go off and spend some time Googling the internet. Ideally I could do with having a chat with someone independant or specialising (?) in this area - any recommendations?

Cheers

Why do I feel like we were only talking about this round my house yesterday!

I have the office on the other thing BTW.

[Phooey]

Nemophilist said:

I came on here hoping to ask the same question so I shall jump on board if that’s ok?

Yes, chip in with pleasure - the more knowledge the better!

JulianPH said:

Why do I feel like we were only talking about this round my house yesterday!

Well remembered

Thanks again for asking Francis to have a look at my motor

JulianPH said:

I have the office on the other thing BTW.

Thank you mate - muchly appreciated. Hope your foot is better!

[Whistle]

I remortgaged my main residence to buy mine.
I did have £200k equity at the time.

[Sarnie]

Phooey said:

I suspect mortgaging a holiday let uses a different criteria to BTLs. I'd greatly appreciate it if anyone is happy to share any advice or pointers / recommendations etc etc before I go off and spend some time Googling the internet. Ideally I could do with having a chat with someone independant or specialising (?) in this area - any recommendations?

Cheers

Most lenders have withdrawn from the holiday let market currently, a couple remain........the property is assessed on the same basis as a BTL (Eg how much it would rent for on a six month AST in the standard way) not what it would rent for on short term holiday lets.

Expect 25-30% minimum deposit......

[Sarnie]

Nemophilist said:

I came on here hoping to ask the same question so I shall jump on board if that’s ok?

I’ve read up on the BTL guide on NatWest website and it doesn’t make it to clear but seems to be the same criteria

I’m just on the very early stages of considering it, but having read through some old 2017/2018 threads it makes out that it’s not the good investment it used to be unless buying for cash (which I wouldn’t be)

Natwest will not lend on a holiday let basis......

[Phooey]

Whistle said:

I remortgaged my main residence to buy mine.
I did have £200k equity at the time.

We own our home outright so have thought of this as an option - I just need to speak with someone who can advise on the pros and cons of borrowing from it. I also need to get my head around how best (for me) to purchase it - via a ltd co or sole trader etc..

If you don't mind me asking, Whistle - any regrets in purchasing your holiday let, or any tips you'd be happy to share with a fellow PH'er

Sarnie said:

Most lenders have withdrawn from the holiday let market currently, a couple remain........the property is assessed on the same basis as a BTL (Eg how much it would rent for on a six month AST in the standard way) not what it would rent for on short term holiday lets.

Expect 25-30% minimum deposit......

Thanks Sarnie. I popped over to see Julian yesterday (we live within 2 miles of each other!) and he recommended contacting you. I'm asking on here firstly just to get a broader view on the subject. re deposit - 30-40% dep is comfortable and what i had in mind. Thanks again

[Sarnie]

Phooey said:

Thanks Sarnie. I popped over to see Julian yesterday (we live within 2 miles of each other!) and he recommended contacting you. I'm asking on here firstly just to get a broader view on the subject. re deposit - 30-40% dep is comfortable and what i had in mind. Thanks again

The simplest, cheapest way of doing this by far is to lend against your own home. You then become a cash buyer and don't need to jump through lender hoops on the holiday let. You could then buy it under a Ltd Company which is straight forward if you are not requiring lending to be secured on the new property......

naturally you should speak to an Accountant on the mechanics of the funds and how it needs to be structured.....

[Hitch]

I had a holiday let mortgage offer from Monmouthshire in Jan of this year. Min deposit was 25% and the rate was comparably high at circa 3%. Income assessment was based on a projection from Sykes Cottages, which they provide for free.

Clearly things will have changed in the intervening months but the above is pretty reflective of the standard market.

[Zstar]

I have a holiday let in Carbis Bay. For us it was a hedge on the Uk property market as I live overseas, but we may return in a few years for my sons schooling.

You have to factor in furnishings, commissions given to agents, handover fees etc. I didn’t set up a vehicle for it as it’s my only uk income so I’m unlikely to be paying income tax. VAT is a real killer - if there are ways to reclaim this I would be all ears!

[Phooey]

Sarnie said:

The simplest, cheapest way of doing this by far is to lend against your own home. You then become a cash buyer and don't need to jump through lender hoops on the holiday let. You could then buy it under a Ltd Company which is straight forward if you are not requiring lending to be secured on the new property......

naturally you should speak to an Accountant on the mechanics of the funds and how it needs to be structured.....

Interesting - thanks. re accountant - I mentioned it briefly to mine earlier today and they did hint i might need a "specialist" in this field. I imagine what they mean is someone who can look at the (my) bigger picture - assets, tax status etc. I might need to find me a good one if I pursue this.

Hitch said:

I had a holiday let mortgage offer from Monmouthshire in Jan of this year. Min deposit was 25% and the rate was comparably high at circa 3%. Income assessment was based on a projection from Sykes Cottages, which they provide for free.

Good to know - thanks

Zstar said:

You have to factor in furnishings, commissions given to agents, handover fees etc. I didn’t set up a vehicle for it as it’s my only uk income so I’m unlikely to be paying income tax. VAT is a real killer - if there are ways to reclaim this I would be all ears!

Cheers. re VAT though - would the downside to reclaiming VAT be having to charge it on your letting / rental?

[Killer2005]

Sarnie said:

Phooey said:

I suspect mortgaging a holiday let uses a different criteria to BTLs. I'd greatly appreciate it if anyone is happy to share any advice or pointers / recommendations etc etc before I go off and spend some time Googling the internet. Ideally I could do with having a chat with someone independant or specialising (?) in this area - any recommendations?

Cheers

Most lenders have withdrawn from the holiday let market currently, a couple remain........the property is assessed on the same basis as a BTL (Eg how much it would rent for on a six month AST in the standard way) not what it would rent for on short term holiday lets.

Expect 25-30% minimum deposit......

Are Leeds Building Society still doing them?

[JulianPH]

Phooey said:

Thank you mate - muchly appreciated. Hope your foot is better!

No problem mate, it was great to see you and my foot is getting better now thanks, but still hurts! At least I am no longer walking like a 90 year old!

Regarding the accountant, give me a bell when the time is right, I have an excellent one who can do this for you.

[Stella Tortoise]

Stella Tortoise said:

There are lenders for this, it's much the same as BTL but the rental income can be made up of 1 week low, 1 med and 1 high averaged out and applied over 46 weeks or so.
The rent usually isn't an issue.

Actually 24 weeks these days.

[Mortgage_tom]

I am not up to date post covid and holiday let mortgage criteria, although I assume it’s pretty much completely on hold. But if you want to read up on holiday let mortgage criteria then I suggest reading the criteria from Leeds building society and the Principality. Your personal minimum incomes are a consideration, at least 25% deposit (pre covid) and how different lender assess the rent vs loan amount can vary a lot. Some value rent on normal tenancy agreement, other will use a low, mid and high season average with an assumed occupancy.

There are many tax breaks to holding holiday lets personally, not via a ltd. They are an unusual asset in this way and can be attractive for that reason. You need to take professional advice on this and your circumstances. But headlines are you can still offset mortgage interest, can be exempt from council tax and some capital allowances, the details of which are beyond me. Its important you consider this before you choose which asset to raise the money from. As if you raise it on your own home then you could potentially loose the ability to offset the mortgage interest against the income.

Its a complex and intresting area for both accountants and brokers.

[blueg33]

Have an application for a holiday let mortgage in at present. Rates aren't great, circa 1% above BTL, but probably about 10 lenders with offers, max LTV 75%.

We have had to demonstrate income for the property based on advice from agents, and demonstrate our incomes.

Survey takes place next week.

We are buying a 3 bed, 3 ensute, barn conversion in north devon with sea views

[98elise]

What sort of realistic yields are people getting on holiday lets?

I'm itching to get fully out of residential BTL? I'm happy with the extra work involved but it's got to stack up financially.

[blueg33]

98elise said:

What sort of realistic yields are people getting on holiday lets?

I'm itching to get fully out of residential BTL? I'm happy with the extra work involved but it's got to stack up financially.

Our NIY is 6.2%. Hopefully the asset will grow in value too.

I have a 1, 5, 10 and 20 year model, showing exits at each of those points. The i year looks bad obviously due to start up costs, 5 is good, 10 better. I have used the indexation that my funders for resi real estate assets use, ie 3% pa.

The big cost with holiday lets though are: Agency, cleaning, laundry. Unless you are on the doorstep you need these people.

We are installing a hottub, it pays for itself in 1 year and we will replace it every 5.

Lifecycle can be an issue with wear and tear, but a good quality let generally gets decent occupiers so its probably less than a regular buy to let.

In Peak months we can charge about £1600 per week falling to £400 per week in low season. We have modelled 22 weeks of occupancy.