We are thinking of purchasing a property in the Lakes that will be used predominantly as a Holiday Let. At present the property is owner occupied so has no holiday letting accounts available.
As a start point, we went onto one of these compare the market mortgage comparison websites and soon realised that they are “number crunching” devises that bring up the best mortgage rates………. that you don’t qualify for it seems. Well, our Bank was thrown up so well spoke to their Commercial Lending Department. They told us that they do lend on Holiday Let properties, however only those with a trading history and three years accounts. Our proposition they said would be classed as “start up” and is outside of their lending criteria. One other point that we found disturbing is that the lending manager told us that even in the case of a trading business, the loan would be set up on a capital and interest basis over 15 years.
- Can we obtain a mortgage for a holiday let that has not been used for that purpose before?
- Is it possible to have the loan set up on an interest only basis?
Yes, these comparison sites, like Compare the Market and Moneysupermarket.com serve a purpose, however when you look for something like a mortgage product, especially one for a holiday let property, there’s big advantages to speaking with a qualified mortgage broker.
Now on to your two questions; common ones actually.
Without mentioning any names, we know which Bank this information has come from! Your bank lends, but unfortunately not very often, as the vast majority of holiday let purchases are start- ups and an amortised (capital and interest) loan over a 15 year term plays havoc with cashflow. So to question 1, yes we can obtain a loan, subject to status and valuation, using projected holiday let rental income. All you will need is letter from a holiday letting agent confirming achievable rents for high mid and low season with a break down of the number of weeks in each season.
Question 2 is again a yes. Interest only up to 75% LTV is possible giving you the flexibility you will need in the early years of your venture. If/When the property takes off financially, you may want to overpay by 10%, you can choose when to…….rather than having to in the case of a capital and interest loan. Moreover it is likely to be more tax efficient over time.