Mortgages for purchasing a Holiday Let Home – What you need to know

We operate in several very popular seaside towns including Brighton and Hove, Seaford, Worthing and Shoreham-by-Sea. All of these destinations make great holiday spots and are the ideal places to invest in a holiday home either for personal use, for rental value or both. However, purchasing a home as a holiday let investment is different from a standard home purchase or buy-to-let and requires a specialist holiday let mortgage.

The difference between a Buy to Let mortgage, Holiday Home mortgage and a Holiday LetMortgage

Buying a holiday home for yourself or close family to use is in the eyes of a mortgage lender, a different transaction to buying a house or apartment to use to generate income, which can be classed as a business. A standard residential mortgage won’t permit you to let out your home for money in any way, shape or form, because the charge on the property requires you to have full possession over it and your mortgage rate will have been calculated based on this low-risk scenario.

Mortgages that do allow letting will dictate the way the property should be presented in terms of furnishing, and the number of weeks per year it’s used for guests and visitors will dictate which type of mortgage is most appropriate. For example, a buy-to-let mortgage considers that the property will be let for 6 to 12 months at a time and income generated from this is used to calculate your affordability for the loan.

Holiday let income is not so steady and certainly not guaranteed; there will be busier times of the year for example summer if you opt for a coastal property where rents are high and the property is popular, but in off-peak times the property could be sat empty. For this reason, your affordability for a holiday let mortgage will also be based on your personal income and current liabilities to ensure the cost of the mortgage can be covered year-round. In order for the property to qualify as a holiday let, it needs to be furnished (beds, sofas, appliances and kitchenware) and available for letting a minimum of 210 days of the year. This does mean however that for 5 months of the year you can enjoy the home for yourself, giving you the best of both worlds – somewhere to escape to that can also generate an income when you’re not there. There’s also a tax benefit to owning a furnished holiday let in that mortgage interest and any expenses related to letting such as utility costs, repairs  and furniture costs can be deducted as business expenses from the rental income.

The cost of a Holiday Let mortgage vs the income

The amount you can charge for lettings will depend on the property’s location and local amenities, as well as the standard of the interior. For example, a stunning modern riverside home such as Chandlers Wharf in Lewes, close to Brighton and surrounded by beautiful countryside could command up to £1000 per week in peak months.

 Finding guests for a holiday home is now fairly easy with so many online platforms to advertise. You could either let the property yourself through self-service websites such as AirBnb, or using social media, or you could sign up to a local or online holiday letting agency who will help you with things like insurance, key management and linen services.

Holiday let mortgage rates, at the time of writing, sit between 2% and 4% but this rate will depend on the loan to value that you require. To help your search for a holiday let property in Sussex, it’s good to get an idea of the amount of income that could be generated. Be aware that some Leasehold residential apartments will not allow holiday letting, so check the legal pack first. We can give you this information about any of our property portfolio and give you an idea of how popular each area is likely to be – all of our team at Oakley Property live locally and know their areas inside out. For help finding your ideal holiday let investment, speak with our Residential Sales team on 01273 688881