 Three
Ways to Find Your Holiday Home Finance. EB July
2007
A holiday home is exciting to buy. But it’s
expensive – especially nowadays when property
prices are spiralling in the areas where you are
most likely to want a holiday home.
So before you can start planning the furniture
and curtains, you first have to start thinking
about
holiday home finance. How are you going
to pay for it?
There are different ways of
financing your holiday home. Here are
just a few.
Second mortgage
A second mortgage is a mortgage raised in
addition to your first mortgage, whether it’s on
the same property or a different property.
Confusingly, some people define it as a
mortgage on a second home, whether or not
you have a mortgage on your first home! In other
words, as a mortgage on a property other than
your main residence.
When you apply for a second mortgage for your
holiday home finance, the lender will first and
foremost look at what other financial
commitments you have. This means that if you do
already have a mortgage on your first home, they
will take this into account when deciding how
much you can afford to pay for your holiday
home. If your existing mortgage is quite
substantial and your income is not
correspondingly large, the lender may be
reluctant to lend you a large enough sum to buy
the holiday home.
If you are planning to let out the property for
some of the time, this will help with the income
problem. However you must inform the lender and
make sure that this is permitted under the terms
of the loan. If not, and you really want to do
this, you might need to find another lender.
Your broker will help with this. Remember that
if it’s not actually a holiday let business, you
will have full tax to pay on any income from
letting. If you do want it as a holiday let
business, you need to talk to your broker as the
mortgage rules will be very different.
Equity release
If there is a problem with getting a mortgage
for any reason, another possibility for your
holiday home finance is equity release on your
existing home. This can be easier than getting a
mortgage on a different property, especially if
you use the same lender – there are fewer
complications about proving your income etc.
However it doesn’t have to be with the same
lender – you may be able get better terms from
another one. If you have sufficient equity in
your main home, it could enable you to buy the
holiday home outright. Even if you haven’t, it
could help you come up with a good-sized
deposit, which would mean you could get very
good terms on your mortgage.
Splitting
Another way of raising your
holiday home finance is to split the
borrowing between your first home and your
holiday home. This can be a good idea if you
would need to borrow more than about 75 per cent
of the purchase price of the holiday home, which
would incur higher interest rates and lending
fees. It also means you can make use of both
repayment and interest-only mortgages.
There are a number of options for your holiday
home finance. Be prepared to be flexible, and
talk to a
holiday home mortgage broker to see
what’s available to you.
Bookmark with:
Facebook
 Delicious
 Digg
 Reddit
 Stumbleupon
|
