My wife and I own 2 properties in total, our main home and a holiday property in Bath that we have owned for 7 years. We are in the fortunate position of having no loans secured against either of the properties. We are both retired, aged 57 and have joint pension income of £52K. Our holiday let was recently valued at £950,000. It does well for us in terms of return, as the property and area lend themselves to virtually all year-round bookings.
What we would like to do is take some equity from this property and purchase another in the same area. We are looking to purchase at circa £550K. We have spoken to Lloyds (our Bank) about a holiday let remortgage to raise the deposit for the new purchase. The Mortgage Adviser told us that they would be quite happy to lend and their mortgage rates are good. It seems, however, that their lending criteria will only allow for a 15 year capital and interest mortgage loan, which simply does not work for us.
In addition, the Bank has told us that any holiday let purchase would require accounts, because “start-up” holiday let businesses were outside of commercial lending critera. Our questions are:
- Is it possible to obtain an interest only holiday let re-mortgage?
- Can we obtain a holiday let mortgage to purchase a property that is a start -up business with no accounts?
Well, we have some good news for you, the answer is ‘Yes’ to both questions.
Interest only mortgages should be available both to purchase a new holiday let property and the re-mortgage of an existing holiday let business. Most of our customers opt for interest only mortgages; not only do they vastly improve your cashflow situation over a capital and interest arrangement but they are also the sensible choice for many other reasons, not least tax.
A mortgage for a start-up holiday let business should be available providing the income projections satisfy the lender’s interest service cover ratios. We have lenders willing to accept an income projection from a specialist holiday rentals agency, detailing potential gross income for the year, broken down in to number of low, medium and high season weekly rates.