There is lots of useful information in our article and case study sections. Built up over many years we share new developments in lending attitude and also client case studies for the more difficult holiday lets!
At Holiday Let Mortgages, we have been arranging finance for holiday lets since 2006. We are one of, if not the first mortgage broker to specialise in this type of finance.
In the early days, most of the financing to purchase holiday lets was done through the commercial lending department of a major Scottish Bank, as the Building Societies that now dominate the sector, had not entered the market.
Re-mortgages were virtually unheard of, as there was nowhere else to go. Many borrowers that had used commercial mortgages to purchase a holiday let property, found themselves a prisoner to their lenders SVR (Standard Variable Rate) when their initial low rate deal came to an end.
Nowadays, there are more than 20 lenders that are active in the buy to holiday let market, many dealing through intermediaries (brokers) only. This means that a good specialist broker can find customers a great deal on a holiday let remortgage.
What are the main recent changes to lending criteria?
Until very recently, all the lenders in the market specified that applicants must have a minimum income of 20 or 40K, from earned income. This is income from employment, self-employment or pension, with a minimum of 2 years accounts for the self-employed.
The good news for potential borrowers is that this situation has recently changed. We now have a lender onboard that takes a more pragmatic view. It will accept applications from those that simply have some form of income, providing their bank statements show liquidity. An example would be an applicant that has an existing holiday let and receives income from it.
In addition, this lenders criterion states no minimum period required for the self-employed. The approach taken for minimal periods of self-employment is a sense check. If an applicant has been employed for a good period in a profession and has recently gone self-employed, their bank statements show liquidity, then they are not barred.
Again, until very recently, age at entry or expiry, was a bar to some looking to remortgage and extend the term, avoiding the need for sale before expiry of their existing contract.
Often, the age problem was combined with limited “acceptable” retirement income. As previously mentioned, most lenders have minimum earned income criteria, which is an additional barrier to those with small pensions or those in “drawdown”. Drawdown income is classed as return on investment, not earned, so is not entered into most lenders’ minimum income calculation.
The good news, for those looking for a new holiday let mortgage deal, is that we have a lender that will accept a term to age 94 and there is no minimum income stipulation. Using pension drawdown, to prove some income is also acceptable.
There are now a wider range of lenders willing to consider unusual borrowing situations and property types.
As always, we recommend that you consider using the services of a specialist holiday let mortgage broker such as ourselves.