Deposits For Holiday Let Mortgages

When purchasing a property with the aid of a holiday let mortgage you will need to provide a cash deposit of at least 25%.

The source of the deposit is an important consideration that is often overlooked by many purchasers.

Deposits can come from:

Cash savings
Investments
Property sale
Inheritance
Remortgage
Gifted money

There are some pitfalls when dealing with raising a deposit by remortgaging a property you already own, that if overlooked can ruin a good case or cost an applicant quite a bit of money in abortive costs.

Issues that often arise when trying to raise a deposit from equity in other properties:

The current mortgage is tied to an existing lender with large Early Repayment Charges and they won’t offer you a further advance
Currently you’re enjoying a great long term low rate deal that’s too good to let go, but your lender won’t offer a further advance

In addition to obstacles in raising the deposit for the purchase of a holiday let, there is also the real possibility of going about it the wrong way!

Examples include:

attempting a re-mortgage to a lender that does not allow capital raising for the purpose of buying a holiday let
re-mortgaging to a lender that insists on simultaneous completion of the re-mortgage and holiday let purchase
raising deposit capital through a remortgage on a main residence, when purchasing a commercial holiday let, can cause rejection if the commercial lender believes that the applicant is becoming over exposed to interest rate increases that may effect overall financial stability

The list of potential deal breakers is too varied to include them all here, so to avoid a costly mistake please speak to us first in order to make sure that both sides of the transaction are fit for purpose.