 Articles:
Holiday Home Finance: What if You Want to Let
It? EB July 2007
If you are looking for
holiday home finance, you need to decide
first of all what you actually want the holiday
home for. There are three possibilities:
1. Just for the use of yourself and your family
and friends.
2. Mainly for your own use, but you plan to let
it out for some of the time to help pay the
bills.
3. As a holiday let.
If you want it simply for your own use, you
should be able to obtain holiday home finance
without a great deal of difficulty. The terms of
the mortgage should not be too different from
those of a mortgage on your main home.
If you are looking at option (2), you should
still be able to find holiday home finance
without much difficulty. However you absolutely
MUST make it clear to the lender that you do
intend to let it out at times and make sure you
choose a lender that allows this.
The third option is more complicated. If you are
buying your holiday home as a holiday let
business, there are considerable tax advantages
– provided you conform to the Inland Revenue’s
requirements for the definition of a holiday
let. But because it’s seen as buying a business
rather than buying a property, holiday home
finance is harder to obtain.
• The deposit required can be anything from 15
to 30 per cent of the purchase price.
• Providers of holiday home finance decide how
much to lend on the basis of a projection of the
potential rental income, not just the purchase
price. So they need to obtain a realistic
projection of the potential income. If it’s
already a going concern, this isn’t difficult –
otherwise it has to be obtained by such means as
looking at other similar businesses in the area.
• The lenders usually require that the average
monthly rental income should be anything from
120 to 150 per cent of your monthly repayments.
Whatever type of
holiday home finance you are looking
for, there is likely to be a specialist lender
who can provide what you need. It’s a good idea
to find an independent mortgage broker who can
help point you in the right direction.
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