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Articles:
Different ways to finance your holiday home
SB May 2007
There is a big boom in holiday home
buying in the UK. As the idea takes off,
more and more people want to get in on the act.
Holiday homes in the more attractive areas are
already spiralling in price out of many people’s
reach.
Some people are solving the problem of
buying a holiday home by clubbing together
with friends or other family members. An
increasing number of lenders are willing to
offer a
holiday home mortgage on a joint ownership
basis, which allows the lender to take up to
four incomes into account in agreeing the loan.
This can be an excellent solution for your
holiday home mortgage if you can’t afford one on
your own. But of course, if you are going down
this route, it is crucial that you and all the
other parties look very carefully at all the
legal implications, and that a watertight and
detailed legal agreement is drawn up. This will
need to take account of what happens if one
party loses their income or decides to withdraw;
whether equal repayments should be made if the
parties have different levels of income; and if
a bigger share of the deposit, and/or bigger
monthly payments, should mean a bigger stake in
the ownership of the property.
Some people are finding that an intriguing
alternative to a
holiday home mortgage is what is known
as “fractional ownership”. This means that,
instead of buying a whole property, you buy a
share or fraction of it. That gives you a
corresponding proportion of the year to use it,
either for yourself or to rent out. This is NOT
the same as a timeshare. You are a part-owner
of the property, you have a stake in its rising
value, and you can sell your share at the
current market rate.
Many people are finding that this makes sense,
since nobody uses a
holiday home for 52 weeks in the year. The
property is managed, so you don’t have to worry
about its upkeep when you’re not there, and it’s
all ready for you when you arrive.
Lenders in the UK have been reluctant to provide
a holiday home mortgage for fractional
ownership. However, it would be possible to
raise money on other property that you own.
So if you can’t afford a holiday property all to
yourself, or don’t want to take on that much
responsibility, there are alternatives that make
the whole situation easier.
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