Holiday let mortgage brokers (or mortgage intermediaries as they are also known), help clients select and apply for mortgages. This means they have a tremendous understanding of the current holiday let mortgage market as well as thorough experience of the mortgage application and approval process.
Let’s face it, the majority of homeowners only apply for a mortgage just a handful of times during their lifetime, and even fewer people have the experience of applying for a holiday let mortgage. The mortgage market moves quickly with products and criteria coming and going on a regular basis, so any knowledge accrued from a previous mortgage application may not be particularly relevant to today’s economic environment.
With that in mind, we’ve spoken to three brokers who have literally been there and bought the t-shirt, time and time again. Here they provide their insider tips about how to (and how not to!) approach applying for a holiday let mortgage.
Joe Stallard, Director, House and Holiday Home Mortgages, begins with some guidance on being completely transparent with mortgage lenders.
He says, “Don’t try and hide anything! Being as open and upfront about all features of the property will give you the greatest chance of securing a mortgage, as the holiday let industry is specialist. This includes everything from the construction materials used, through to the condition of the property, whether there are solar panels, septic tanks and even the EPC rating.
“What might seem like a small, insignificant detail can have a big impact on whether you can get a mortgage or not.”
Andrew Soye, Director, Holiday Cottage Mortgages continued in a similar vein:
“When you think of buying your dream holiday let, your mind might conjure up visions of a beachfront cottage in Cornwall, or maybe a golden stone cottage in the Cotswolds. What your mind probably won’t consider is the often strange property requirements that a holiday let mortgage lender might have.”
Andrew highlighted three examples of potential stumbling blocks, that he’s witnessed over the years:
The property must be habitable: avoid heavily run-down properties that need major refurbishment, as these will be nowhere near ready for lettings and will most likely be declined.
Proximity to the local pub: this one sounds counter-intuitive! Whilst holidaymakers love a short trip to the pub, mortgage lenders typically don’t like the property to be too close. Anything that is directly adjoining the pub will almost certainly be rejected, so aim to have at least some distance between your dream cottage and the local.
Occupancy restrictions: this can happen with freehold properties, but it’s more a focus for leasehold apartments. Get a copy of the lease yourself upfront and check for any clauses that prohibit holiday letting, as that is a real deal killer.
Joe also gave some helpful insights into leasehold holiday let properties:
“If you’re buying a leasehold property, then obtaining as much information about the lease as possible can avoid a lot of problems. Everything from lease length, to ground rent and service charges could impact the lending. Furthermore, some properties do restrict usage as a holiday let, so identifying any such causes in a lease as early as possible can save a lot of time and effort.”
Sophie Waugh, Mortgage Technical Manager, John Charcol, took up the issue of the owner using the property themselves.
She commented: “Think about your main aim for the holiday let. Is it going to be a property that you would like to visit yourself a couple of times a year, or is it going to be somewhere purely to generate an income, which you have no intention to stay in yourself?
“This can be important as lenders have various criteria around if you can stay in the property yourself and if so, how many weeks each year you are able to do so. This is usually information that your broker will need when they are looking at lender options for your holiday let mortgage.”
Sophie also had guidance about ensuring the rental value is based on reality not just a finger in the air:
“Speak to local agents in the area the property is in, as well as do your own research on what gross rental income you would receive in high, mid and low seasons so that you can get a good understanding of the amount of borrowing available on that property based on these figures.”
Finally, Andrew concluded:
“The proposed rental income of the property is a cornerstone function of a successful holiday let mortgage application. Once you have set your sights on a property, speak with a reputable holiday letting agency to get a view on the likely performance of the cottage and the services they offer.
To conclude, brokers gave 5 key tips for people who are considering applying for a holiday let mortgage:
- Be open and upfront about the property.
- Be aware of potential stumbling blocks regarding the property itself.
- Get to grips with the lease agreement.
- Decide how many days the owner will want to use the property themselves.
- Find out how much rental income is realistic.
Many thanks to the mortgage intermediaries who contributed to this blog post.
Please be aware that this information does not constitute a recommendation nor an endorsement by Suffolk Building Society.