Bridging a holiday let property

Q

Holiday Let Mortgages, we are trying to finance a project to convert a barn we intend to use for holiday letting. Problem is that we don’t like the interest rates that are being quoted for the Bridging Finance and we are finding it impossible to find a Holiday Let lender that will refinance the loan onto a holiday let mortgage.

The barn has planning for holiday let use only and we are being quoted 1.25% per month for the Bridging Finance plus 2% arrangement fee and legal and valuation fees at our cost! We have seen other Bridging Finance from 0.65% per month!

Our questions are:

  • Why is the Bridging Finance for a holiday let barn conversion more expensive than other types of residential bridging finance?
  • Can you secure us a long- term holiday let mortgage loan?

Wayne

A

Wayne
In some small way you have answered your own question here when you said “other types of residential bridging”. We must be quite clear with you here; your project is not residential. What you are building might look like it, but it’s not. The usage restriction has been specifically put in place to ensure that the building is a non-residential dwelling. In effect, it is a type of commercial unit and any mortgage lender will charge a rate of interest which reflects that, whether it be the bridging finance or a holiday let mortgage.

Most Bridging Finance lenders are not specialists in projects with anything other than full residential usage in the planning, however we have access to some that will lend up to 100% of build costs, subject to project status.

Regarding your other question about a long-term holiday let mortgage, this might well be available to you at a max loan to end value of 60%, subject to status.

Whilst the Bridging Finance lender is more concerned about the project status in terms of day 1 value, build costs and end value, the holiday let lenders give as much weight to your personal status in terms of credit reference, strength/ source of personal income and background debt levels.

Your questions Wayne are timely, as it’s important to get the holiday let mortgage loan agreed in principle, before taking on the bridging finance, or you could be forced to make a distressed sale.
This can be very costly and should be avoided.