Finance for your holiday let

Buying a holiday cottage is a long held dream for many, but can the financing also be described in this way?

Perhaps in 2020 you want a “Staycation” – and buy your own holiday property!

Reasons to be cheerful

You love the place and can see good business reasons. A healthy rental stream from all the punters who share your passion, the increasing ease of letting (eg. AirBnB), and the more preferential tax treatment than a buy to let offers would all be valid considerations.

So how easy is it to find a lender and how many options are there?

First of all, some questions:-

 Is it a venture purely for profit, or will you want to use it yourself for some or all of the time? (If it the latter, it is classed more towards being a holiday home).

 Is the property currently used as a holiday let, and if so, are accounts available?

 Will you use a letting agent or try and manage the property and bookings yourself – perhaps through AirBnB?

 Can you get a prediction from a letting company as to what income will be generated from the property?

Choosing a lender

The choice of lender will vary according to the answers to the above. If you are planning to use the property yourself, then a lender will look at the case as a second home, and probably rely mostly on your surplus income to cover the costs rather than letting income.

If it is primarily to be a letting property, then the income generated or likely to be generated will be paramount. Lenders will however also be keen to know that you can still cover repayments should your letting income slowdown or stop for any reason.

Do not use traditional buy to let loans or a residential mortgage for a holiday let property!

It is important to understand that lenders offer different products for normal buy to let properties (one tenant – long term lease) as opposed to holiday let properties (many tenants, very short term lets); If you use a home or a buy to let property as a holiday let, the lender is likely to ask you to repay the mortgage on the property!

Plenty of choice

The good news is that there increasing numbers of lenders with specialist holiday let products – around 17 at the last review, so there are some options in the market place.

Rates and Fees

Rates start at around 2.5% per a annum, and you will need at least a 25% deposit towards the purchase, perhaps more.

Lenders set up fees are generally around 1.5% to 2% of the loan amount, plus a valuation and legal fee.

Purchasing through a limited company

If you use a limited company for the acquisition, then you can expect to pay 1% or so more on the interest rate over the above figures.

Best lender for your needs – why use Key?

Key Commercial Finance are a brokerage with a wide range of lenders available to us and many years experience. We will carefully review your circumstances and the property that you wish to buy. This will enable us to make the best possible case to a lender and maximise chances of success with the best lender for your needs.

Please call us to discuss any queries or needs for this or any other commercial financing requirement – we will be delighted to help!