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BLOG: How to Get a Holiday Home Mortgage

Posted June 23, 2021

Buying a holiday home is an exciting prospect, whether you’re purchasing it for you and your family to enjoy or to bring in some extra money through rental income. Depending on how you intend to use the holiday home can determine what type of mortgage you take out, and may impact how easy it is to obtain the necessary funding.

Deciding to buy a holiday home can be a big financial commitment, so it’s important that you understand how it works and how to get a mortgage for a holiday home, before you make any final decisions. At Watts, our friendly team are on hand to guide you through the process to help you make an informed decision.

How will you use the holiday home?

If you plan to buy a holiday home for your own use, you can take out a standard residential mortgage to purchase it. If you already have a main property, then the mortgage for your holiday home will be known as a second home mortgage.

However, if you are buying a holiday home to rent it out, you will need a dedicated holiday-let mortgage. This differs from a standard buy-to-let mortgage, and is therefore quite a niche area of finance.

How easy is it to get a holiday home mortgage?

Taking out a mortgage for a holiday home can be more challenging than taking out a standard residential mortgage for your main property. If you’re hoping to use the holiday home for your own purposes, a second home mortgage often comes with stricter criteria when it comes to affordability. This is because you already have a mortgage and other outgoings to pay. In most cases, you will need a large deposit of around 10% for a second home mortgage.

Holiday-let mortgages can be more difficult to come by, as only select lenders will offer them. There are many more factors to consider when it comes to affordability, including rental income and how that fluctuates through the year. It’s also important to remember that you will be responsible for things like council tax and utilities bills.

To get a holiday-let mortgage, you will usually only be allowed to borrow up to 75% but it may be more beneficial to lower this to 60%. Lenders may ask that you need to earn rental income that exceeds an agreed percentage of your monthly mortgage repayments.

The benefits of using a mortgage broker

Getting independent financial advice and using a mortgage broker can be incredibly helpful to guide you through the process. At Watts, we have great relationships with both high street and private lenders, and we’re able to search the whole of market for you to find the right deal.

Our qualified specialists have experience in niche areas of finance and we have an understanding of wider financial planning, putting us in a great position to help with even the most unique of circumstances. We will provide you with a dedicated adviser, so you can feel confident knowing you are receiving tailored support.

To find out more about our services and how we could help you obtain the right financial support, get in touch today.

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Watts Mortgage & Wealth Management Ltd is directly authorised and regulated by the Financial Conduct Authority.

We are entered on the Financial Services Register No 624815 at https://register.fca.org.uk/s/

More information is available on mortgages from the Money Advice Service. www.moneyadviceservice.org.uk

Where you have a complaint or dispute with us and we are unable to resolve it to your satisfaction then we are obliged to offer you access to the Financial Ombudsman Service. Please see the following link for further details www.financial-ombudsman.org.uk

Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

You may have to pay an early repayment charge to your existing lender if you remortgage.

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The FCA does not regulate some forms of mortgages. The FCA does not regulate taxation advice, trust advice and some forms of buy to let mortgages.

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